Mortgage Brokers Reclaim the Market

Control of the mortgage market is quickly shifting.?Thousands of loan originators are choosing to become independent mortgage brokers instead of working for a single lender.?Thousands more are still coming.??

As the industry faces an era of higher rates and fewer transactions, originators are finding more opportunities to succeed in the broker space.?When comparing the two career choices, we found the appeal of being an independent broker was undeniable.?

Unlimited Opportunities

Traditional loan officers are limited to just ONE lender.?They’re stuck with one lender’s products, one lender’s underwriting guidelines, and one lender’s rates.?This inevitably means fewer opportunities.

If your single lender doesn’t offer the product or rate the client needs; then you're out of luck. You might have the talent, but without the right tools, you'll have to watch that loan close with someone else.

In contrast, the landscape for mortgage brokers is much more dynamic.?Brokers work with countless lenders who offer a wide variety of loan programs.?Not being limited to one lender, brokers have access to the entire mortgage market at their fingertips.?

Brokers can match their client's needs with the right lender. If the client has a low credit score, there's a lender for that.?If the client needs a jumbo loan amount, there is an aggressively priced lender for that.?If the client needs a 203(k) mortgage, there’s a lender for that.?Put simply, brokers have more options and more tools to help them succeed.?

Easy Underwriting

Brokers have an edge when it comes to conventional loans as well.?They can utilize less restrictive underwriting guidelines when qualifying borrowers.?Easier underwriting helps brokers close quickly and more often.?

Many loan officers are surprised to hear that the mortgage agencies - Fannie Mae, Freddie Mac, and FHA – all have simple underwriting requirements.?Which reflects their mandates to keep homeownership easy and affordable for Americans.?

In fact, it's the individual lenders who add “overlays,” or extra requirements, onto those guidelines.?Lenders add “overlays” for many reasons, but mainly to protect against their own losses.?For loan officers “overlays” only means fewer qualified buyers and less opportunity.

On the other hand, brokers work with lenders that have NO-OVERLAYS.?With no-overlays, they take advantage of the simpler underwriting guidelines and can qualify more clients.?Working with these lenders allows mortgage brokers to say yes, even to clients who were declined somewhere else.?

Unbeatable Rates

Mortgage brokers now have the technology to instantly shop lenders, compare their rates, and offer their clients the best option.?They literally compare hundreds of lenders with just a click of the mouse.?

Brokers also take advantage of different compensation models. They’re able to choose between Lender Paid compensation or Borrower Paid compensation, which gives them complete control over price and profits.?In essence, brokers can stay competitive at every level, every time, and never lose a client because rate.?

This changes the game and differentiates mortgage brokers from loan officers.?Brokers aren’t focused on selling high rates.?Instead, they inform clients on the best available terms and help them make the right choices.?

In striking disparity, loan officers can only offer rates from ONE lender.?Even when the client deserves a better rate, a loan officer may not be able to provide it.?Instead, they must abandon fiduciary responsibility and convince clients to accept the higher rate.???

Loan offers are often taught different sales tactics when discussing interest rates.?Some are instructed to avoid the topic or not answer questions over the rate.?Others use elaborate scripts to confuse and mislead consumers about rates.?Some delay disclosing the true interest rate until it’s too late for consumers to shop for better, forcing them to choose a higher rate or possibly not close on their dream home.?

When it comes to rates, both consumers and originators do better in the broker space.

Stronger Partnerships

Mortgage brokers are also becoming the preferred choice for real estate agents.?Agents understand that homebuyers come from all walks of life, with differing qualifications.?Mortgage brokers can work with those buyers, regardless of their individual circumstances, and find the right lender for them.?

This flexibility is appealing to real estate agents as it saves them time and provides a consistent and reliable source for their referrals.?In today’s market, with fewer refinance transactions, it's critical to be an attractive option for real estate agents.?

Brokers also build strong partnerships with other professionals, like financial advisors, accountants, and attorneys.?When their client has a tax issue, a difficult divorce, or needs to avoid drawing down on their retirement savings, they know a mortgage broker is better equipped to find the right solutions.???

Better Compensation

Having all this choice and flexibility helps brokers close more loans and earn more income.?Brokers are also earning more on each individual transaction.?Since the broker model has a lower cost structure, they retain more of the revenue generated from their loans.?

This is especially true when compared to midsized correspondent lenders who, with the highest costs of all, find it challenging to compete against brokers.?Some even started their own broker channels in efforts to recapture their lost market share.?

According to reports by SimpleNexus; successful loan officers, on average, earn between 88 and 108 basis points in commission.?In contrast, brokerages can offer their loan originators more customized compensation models and larger commissions.?They can earn between 125 basis points to as much as 230 basis points in commission, more than twice as much.

The Future Belongs to the Broker

In a world where consumers covet choice and optionality, the single lender approach seems antiquated and offers limited opportunities.?In this regard, the mortgage broker reigns supreme as the optimal choice for consumers.?In the end, to echo Google’s philosophy: whatever is the best choice for the consumer will always prove to be the winning product.

We see the future of the mortgage industry as a broker’s world.?Many of the country’s top lenders do as well.?The number two lender, UWM (United Wholesale Mortgage), operates exclusively in the broker space.?As a result, the number one lender, Rocket Mortgage, launched their own broker platform.?Countless lenders are also positioning themselves to compete in the broker space.?

Brokers are also getting incredible support from these lenders.?Everything from lead management to a loan origination system is available for brokers who partner with them

If you’re a licensed loan officer with a single lender, you may want to explore your options with a mortgage brokerage.?There are many well established brokerages, offering the same support and benefits of large lenders.?Your future might depend on it.