In Adam McKay’s adaptation of Michael Lewis’ ‘The Big Short’, the mortgage broker is depicted as a smooth-talking con-artist that has little to no interest in the well-being of their borrowers. At one point, after the broker begins discussing how successful they’ve become because of writing NINJA loans (no income, no job) Steve Carrell’s character pulls his team together and asks, “Why are they confessing?” to which one of his teammates says… “They aren’t confessing... they’re bragging”.
Now, unless you’ve had the opportunity to work with a mortgage broker this is probably your perception of who they are. When the housing bubble burst in late 2008, fingers were pointed, and the mortgage broker became public enemy number one… however, in the broker’s defense they weren’t creating these exotic loan programs with… let’s say, flexible (that’s putting it nicely) underwriting standards. It was Wall Street. It was the large banks. It was the lack of oversight in our industry that allowed brokers to take advantage of a volatile system. Everyone involved was to blame… because everyone was blinded by the amount of money that could be made hawking a 7/23 extendable balloon loan (this was real).
*Flashback Moment* I remember working in the servicing department when I had to explain to borrowers that because they missed the window to refinance the outstanding balance of their loan… the balloon payment was due. This meant that they owed the entire remaining balance on their loan. Let’s just say it wasn’t always my favorite call to take…
So… here we are 10 years later, and it appears that the wounds created by the housing bubble are finally starting to heal. National Mortgage News ran a three-part series last week exploring what appears to be the resurgence of the mortgage broker. The report went on to discuss how nonbank lenders are using mortgage brokers to help expand their business into new markets and maintain loan volume by investing in their wholesale channel, all while keeping costs down. The numbers speak for themselves… employment in the mortgage broker sector has shown a steady increase since 2011 when numbers hit an all-time low at 55,250... as of December 2017 mortgage broker employment is up to 94,000.
Brokers are finding their place again in the mortgage industry and it’s an exciting time to be a part of the wholesale space. As you all know we’re in a purchase market… flat out… no denying it. Refi originations are set to drop from $600B to around $450B this year and having brokers with connections to local real estate agents can help lenders capture that purchase volume. Additionally, you don’t have to pay out commissions to retail LO’s or keep the lights on at a remote field office to take advantage of booming purchase markets across the country. Most importantly, revenues in the wholesale space are there. The report from NMN mentioned that the wholesale channel is second to Consumer Direct for the highest gain on sale revenues.
Okay Matt… we get it… you like the wholesale industry. I know, I know, I’ve droned on for too long, but I think what we’re beginning to see is the mortgage broker take back some of the market space they once dominated. We’re seeing powerful movements like BRAWL and AIME that give mortgage brokers a platform to voice concerns about the industry and most importantly, rebrand their public image. All I’m saying here, is that there is a place for the broker in our industry again and it’s going to be increasingly important as a mid to small sized nonbank lender to accommodate the mortgage broker renaissance. Gone are the days where we wholesale lenders can throw price or technology around to earn our partners’ business. We need to be more than that. We must understand that we are just an extension of our brokers' business and our actions directly reflect the outcomes of their borrowers experience. That’s why at Princeton Mortgage Wholesale we’re dedicated to providing the Effortless Mortgage through a partnership with the understanding that we work for you... the mortgage broker.
Talk to you soon!
Photo by Andrew Worley on Unsplash
The opinions expressed in this post are the sole view of the writer and do not reflect the opinion of Princeton Mortgage Corporation.