If you have ever asked a loan officer “are you a direct lender” or “do you have in-house underwriting” or made a decision for your sellers based on whether or not the lender was a “bank” … you need to read this. I wish I had written this! By choice I am a wholesale mortgage broker and consistently outperform so-called mortgage bankers, direct lenders etc.
The original blog post by Andy W. Harris was directed at residential mortgage loan originators … However, it is much more important for every Realtor to understand to best serve your sellers and buyers. The uncut original post in its entirety is HERE with the most important part for Realtors and my added comments in [brackets] follow – a bit lengthy but worth your time.
Many mortgage originators that choose to work for a lender (what some refer to as “Bankers”) are experts at drinking the Kool-Aid served to them by their employer. They have perfected the art of drivel. The problem with [the mortgage] industry Kool-Aid is that it’s laced with snake oil when sold to the public. Many of these “bankers” drink it so heavily that they seem to now inject it to absorb faster, losing all sense of reality when selling services to real estate agents and consumers or when defending objections. Snake oil is an expression that refers to any product with questionable or unverifiable quality or benefit. So, what are common examples of the snake oil quotes or claims told by many lender-employed originators?
I’m a direct lender
No, actually you’re not. If you’re a direct lender, than I’m Gandalf. Listen, most loans are backed, guaranteed or insured by Fannie Mae, Freddie Mac or Ginnie Mae. All residential origination is third-party origination (TPO). I’m pretty sure these agencies don’t originate loans directly to the public and I’m pretty sure you don’t work for them. If you fund off warehouse lines, you’re an indirect lender. A line of credit does not make you a bank. It is surprising regulators still allow the term “lender” in these examples. Most mortgage brokers are more agency “direct” with their investors than lender-employed originators, but they don’t use this title. Even if closing in portfolio-held by an originator’s employer, wholesale lenders offer the same programs in nearly every case (commonly with less overlays).
I feel important using the title “Mortgage Banker”
What exactly does that mean? If you’re employed by a correspondent lender, they are actually defined as a “non-bank.” You also cannot say you are a mortgage bank under advertising rules, but the “er” is okay for the originator to add on? Look, everyone knows this is to try and appear like you are somehow lending your own money, having control or making decisions. You don’t and you’re not. Have you ever heard of a buy-back? That’s not control and that’s not your money, no matter what channel you’re in regarding agency-backed loans. You’re not a bank and you must grasp this reality. If you think about correspondent filtering and overlays, a mortgage broker is more of a “banker” than an employee of the lender claiming to be in many cases. Again … non lender-employed originators (i.e. mortgage brokers) do not use these false titles to the public.
I have “in-house” underwriting
This one is one of my favorites. Most residential loans are primarily approved by a computer, not a human. So all channels and originators have “in-house” underwriting if they have an Internet connection. If someone needs a human to manually underwrite their file, than this may or may not have to do with originator competency. Either way, this claim exposes that the originator has few options or choices with underwriting and that the underwriter’s salary is built into their rate sheet more profoundly. Mortgage brokers not only have the ability to compare and choose, but can also speak directly with very experienced underwriters, comparing all details, personalities, overlays, location and styles. I’d choose the outhouse underwriting. [And, often we will “shop” a scenario to several lenders until we find one that can handle the individual complexities of a borrower situation]
I am a banker “and” a broker
Sorry … you’re not. You are either one or the other. Although you can “broker” loans as a lender-employed originator, please do not call yourself a broker. It is a misrepresentation to the consumer as you are not a “true” broker when sending your leftovers. Your employer will steer everything possible to your credit lines for higher margin and to not comply with anti-steering (which they should be either way). They will also increase the lender-paid margin between the wholesale lender and the company as much as possible to avoid their employees brokering more for better pricing. Many retail lenders also pay less to the originator when brokering loans which violates compensation laws. Brokering this way is “not” true brokering. You do not have the operations for true brokering with credit line influence and steering … period!
“Bankers” have more control
I read this beauty of a statement with some drivel to follow by someone that wrote in to Rob Chrisman. I replied to Rob and he shared my thoughts in his recent newsletter:
“I could not disagree more with comments about brokers ‘losing control’ over the loan or process when submitting to a wholesale lender. This is actually opposite of the truth providing our ability to choose. If I need something executed or an exception from a wholesale lender, it is a much different interaction than if this lender employed me. They want our business and then want us happy, so quality ‘good’ Mortgage Brokers have the advantage. If I have a bad experience with turn-times, communication, an underwriter, you name it … I have the ability to correct that mistake on any future files and we set expectations together as business partners.”
To protect the sanctity and the future of our industry, every originator in the country should stop selling this common snake oil. Here are a few clear benefits to mortgage brokers and their clients over “bankers:”
►Independence produces clarity. You see the entire industry and not just what your employer wants you to see. Multiple lenders, overlays, policies, pricing, the list goes on.
►Lenders compete in all areas for your business and they are your business partner. If you have an issue, you address it differently than if they employed you. NO corporate politics.
►You have a full underwriting, sales and operational team with each lender designated to your success and helping you execute every loan file, every day.
►Faster execution by comparing turn-times, operations and table-funding options.
►Fewer and lower requests for seller concessions due to larger lender credits. Clients are able to negotiate better prices and terms on their new home purchase.
►Wholesale lending is the most cost-effective and efficient way for a lender/investor to get their product to market. Lender comparison and analysis simply results in lower rates and fees to your clients.
►You have less overlays, more programs, agency-direct investors, and operational choice with what investor you choose for a specific client and situation (priceless I can assure you).
►The appetite for wholesale is strong based off the quality of originations. It will get better and better as the years progress along with new non-QM investors and programs entering the market.
►Separating and perfecting origination and processing from underwriting and funding (dual company audits perfecting their gifts), allows for the most compliant and organized loan file.
►You work with the most qualified and experienced people on the mortgage business (my opinion regarding wholesale lenders and their staff).
►With regulatory changes behind us, using a mortgage broker is the safest and most transparent and compliant way to get a new residential mortgage if operated properly.
Wholesale operations as a mortgage broker does require more qualified and experienced staff due to the number of investors and must be operated in a compliant and organized way, just as with any other channel.
At Signet Mortgage I am supported by a staff of five WONDERFUL and TALENTED folks dedicated to get a client’s loan done. It is indeed the “chase” … Working hard to get a transaction completed even under the most difficult circumstances … That is what we get excited about!
Andy concludes with a message to loan originators that would like to work in a platform that they can better serve their clients …
True mortgage brokering is available for those who are qualified and embrace the opportunity. The “era of retail recruiting” is coming to an end simply from awareness. I feel a sense of duty to share this with the industry from all the steering and over-charging most consumers have been positioned with providing the majority are now “bankers.” I also feel the need to share with the great originators out there. For whatever reason many are unaware of opportunities to better serve their clients or how to make wiser and more informed career decisions. [As an originator] If you’ve caught yourself selling snake oil in the past, there is a different way. There is a better way … it has been around for decades and it’s called “wholesale lending.”
Please give me a call before you have to make a decision on where to refer your next client. We can talk about examples where we got a deal done with a broker advantage!
NMLS #183492 CalBRE #01398801