"Much has been written in recent years concerning the branch explosion. However, the inverted yield curve, higher interest rates, sophisticated customers, and tougher competition combine to erode branch profitability. Management needs to take a particularly hard look at additional branches versus other investment options."
What does this mean for mortgage bankers and loan brokers that compete with banks for mortgages?
While more borrowers than ever before are making loan application online, which threatens to make 2007 the year of the digital signature, most still drop out of the automation and work with a loan officer before closing. This gives the advantage to loan brokers and Net Branches on the ground where borrowers live.
That means banks interested in making mortgages are likely to get even more aggressive at courting mortgage brokers and cross-selling within the institution (something they're not very good at), which will put pressure on national wholesale mortgage lenders.
But with a host of other financial services products to sell, I wonder if banks will put much emphasis on home lending as we move further into the trough of the cycle. It won't surprise me if more banks relegate mortgage offerings to the wholesale side of the house and outsource more of their retail business to virtual originators that mask their highly-efficient operations behind the bank's own branding.