I warned my state legislators AND my congressional representatives a few years ago that hammering on and making life miserable for  mortgage brokers would limit choice for the consumer. Did they listen? Hell no! Nor did they listen to any other experienced financial professionals on the front lines of the housing/mortgage meltdown.

Today it’s confirmed that the concerted effort to eliminate mortgage brokers (aka consumer options) is well underway and going according to plan…

Can someone please explain to me how reducing competition in the lending markets will ultimately result in a better deal for consumers?

Already, a few giant national banks-–which have lots of deposits and other sources of cash and so don’t rely on warehouse lenders–are tightening their grip on the home mortgage market. That means mortgage lending is likely to be less vulnerable to fraud as the giant banks impose their tighter legal standards and controls. But this transformation also heralds a less competitive market in which consumers may well pay higher interest rates and fees.

Profit margins already have increased: In the first nine months of this year, the difference between rates on mortgage securities and those paid by consumers on recently granted mortgage loans-– a rough measure of mortgage lenders’ profit margins – averaged 0.80 percentage point, up from a long-run average of about 0.60 point, according to Mahesh Swaminathan, a mortgage analyst at Credit Suisse.

In the first three months of this year, the three biggest mortgage lenders – Wells Fargo & Co., Bank of America Corp. and J.P. Morgan Chase & Co. – accounted for 52% of new home mortgages, according to Inside Mortgage Finance, a trade publication. That’s up from a 37% share for the top three lenders in 2007.