Arizona’s Mortgage Industry

Mark Murphy
Licensing Manager, Arizona Department
of Financial Institutions (AZDFI)

The Mortgage Lending Division of the Arizona Department of Financial Institutions (AZDFI) currently regulates 397 Mortgage Brokers, 69 Commercial Mortgage Brokers, 460 Mortgage Bankers, 21 Commercial Mortgage Bankers and 16,284 Mortgage Loan Originators (MLOs) who hold an Arizona license. In the last two years, new Arizona licensed (MLOs) have grown by 358 percent.

Since 2010, the Mortgage Lending Division of AZDFI has seen a significant increase in the number of licenses it regulates. The number of mortgage brokers licensed in Arizona fell from 582 in 2010 to a low in 2014 of 348, but has been on the rise every year since. Commercial mortgage banker licenses have nearly doubled and commercial mortgage broker licenses have increased by a multiple of nearly 14 to 69 licensees. Of course, 2009 had the implementation of MLO licensing which produced nearly 4,000 licensed MLOs in Arizona by the end of 2010. The number of MLOs rose steadily each year reaching 8,253 by the end of 2014. In 2015, Arizona adopted the NMLS Uniform State Test (UST) and MLO licensing increased by nearly 20 percent to 9,882 by the end of that year – it skyrocketed to over 16,000 by the end of July 2017.

The main reason for the Arizona MLO growth is due the adoption of the Uniform Test in 2015. When Arizona adopted this test, it meant that MLOs no longer had to take an Arizona specific test to qualify. This in turn, provided easier access to one of the hottest housing markets in the nation as more and more companies compete remotely via the web. According to our own internal statistics, the clear majority of new MLO applications come from out of state MLOs. If a MLO does even one loan in Arizona every 5 years, the economics are in their favor. The question to have an MLO changes from should I, to why wouldn’t I have a MLO license in Arizona?

Most borrowers, whether they are purchasing property or refinancing their home, focus on their mortgage rate and loan terms rather than the type of lender they choose. Yet the landscape of the lending market has shifted dramatically over the past few years from domination by big banks to a market where more loans are made by non-banks.

In the past few years, 50 percent of all new mortgage money was loaned by the three biggest banks in the United States: JPMorgan Chase, Bank of America and Wells Fargo. But by September 2016, the share of loans by these three big banks dropped to 21 percent. At the same time, six of the top 10 largest lenders by volume were non-banks such as Quicken Loans and Loan Depot. Quicken Loans and Loan Depot carry 14 percent of all Arizona’s licensed loan originators.

The year 2017 started the way the year 2016 ended – perhaps not surprisingly. Rates for 30-year fixed rate mortgages remain at a two year high, but on the plus side, they are less than a point above the all-time low and remain at historically low levels. “Rate and term” refinance volumes have slowed but there is evidence that cash-out refinances are becoming a more popular choice for borrowers. Purchase volumes in Arizona have grown each of the past five years and are expected to stay strong as we are enjoying the traditional summer buying season.

Some other trends that the Department is seeing are rising interest rates.  Increased interest rates may prevent many first-time buyers from entering the housing market. The millennials, already reeling under student debt, could continue to delay home purchases.

Also, marketplaces are transforming industries across business lines. Marketplace lending platforms match borrowers with investors who purchase securities backed by notes issued by these platforms. By adding critical functions in the middle, they are leveraging technology to unlock value, deliver scale and in the process, take a significant market share of the lending industry. In a digital world, technology allows marketplace lenders to use advanced data analytics to make possible credit decisions, reduce risk and enhance the customer experience. Technology and marketplace lenders will continue to disrupt the lending market.

What the rest of 2017 will hold for the housing market is yet to be seen. If millennials – the demographic tipped to account for a large proportion of home sales – find themselves priced out, there is a risk that this could create a knock-on effect that impacts the growth of the entire housing market.

Mark Murphy joined AZDFI in 2006, as an examiner. He was responsible for examinations of motor vehicle dealers, sales finance companies and money transmitting companies. After accepting a position with the National Credit Union Administration as a Credit Union examiner for two years, he returned to AZDFI in 2011.  He was promoted to Senior Examiner in June of 2016, and was promoted to Licensing Manager in March of 2017.  He currently oversees the licensing and regulation of 26 different licensees which now includes the licensing of Appraisers, AMCs and Property Tax Agents.