Residential Lending Moving Toward Mortgage Brokers
I believe that 2014 will be the year when mortgage broker relevance reemerges and broker-originated mortgage loans reclaim market share—a threshold that signifies that they have once again become a force in the market. Brokers have broad market visibility, the ability to leverage the tremendous power of word of mouth and social media endorsements needed to satisfy consumer’s shopping predisposition.
Consumer Preference
No originator is as “close to the customer” as is a broker. Yes, bank loan officers and retail branch originators may work and live in the same community, but the mortgage broker is an entrepreneur who is totally dependent on, and invested in, his community for his livelihood. Consequently, you find that mortgage brokers tend be actively involved in their communities as volunteers in such capacities as youth sports coaches, civic club members and religious organization participants.
When it comes to making decisions about the largest asset and largest debt of their life, consumers have demonstrated a preference to work with people they know, trust and respect. Moreover, the traditional broker advantages of maximized choice and superior value continue. As the unwarranted stigma that surrounded mortgage brokers over the past few years has lifted, American consumers are re-embracing the professional mortgage broker/originator as their preferred choice for mortgage advice. But there is even more to the explanation.
Originator Preference
Many top originators prefer the freedom that the brokerage model provides them. It enables them to build and manage their business to best serve their customer’s needs. With the mortgage origination business still so dependent on personal, face-to-face relationships, many originators justifiably believe that they need to control as much of the process as possible if they are to remain accountable to their customers.
Dedicated Wholesale Lenders
Yet these brokers and returning brokers must have partners in wholesale lenders who have access to the agencies, the financial resources to remain stable and even to pursue new non-Agency business, and have unquestionably efficient, compliant operations platforms.
If you compare the list of the top wholesale lenders from 2007 to today’s top 10 list, you will find virtually a 100% change. Additionally, of the top 10 overall residential lenders in 2010, nine were involved in wholesale lending. Today, none of those lenders are involved in the wholesale lending business. Some were forced out of business and others voluntarily took themselves out of business.
In their stead has emerged a group of mid-tier, primarily non-bank lenders who are a mix of multi-channel originators and wholesale-only (or primarily wholesale) originators. What separates this latter group is an unwavering commitment to the wholesale channel and the business of professional mortgage brokers.
Such dedication and passion for this way of doing business has led to innovation in both style and substance. Today’s top wholesale mortgage bankers are lean, efficient and technologically leveraged organizations that have re-engineered the underwriting process to save time and improve service levels. Never before have the two parties—brokers and wholesalers—been so reliant on one another. Nor has the partnership between them ever been more beneficial to consumers.
Therefore, this will be the year that mortgage brokers regain relevance thanks to partners committed to supporting them and customers who value their personalized service. The best news of all for brokers is that the 20% market share that I believe will be reached this year may only be a fraction of what they will achieve in the years to come.
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