“Loan brokers are one of the least expensive ways to bring a loan to market,” said David H. Stevens, commissioner of the Federal Housing Administration (FHA) during his presentation to the National Association of Mortgage Brokers 2010 Legislative & Regulatory Conference in Washington, D.C.
Brokers, in their purest form, are an extension of the lenders they represent and a borrower’s best friend. Without sacrificing professionalism or ethics, professional mortgage brokers find the very best lending programs at the best rates, fees and terms. They, in fact, do the shopping for the consumer and this is why we believe that not only will brokers remain a viable source of loan originations for the industry, but will dominate once again in the future. Bottom line, consumer demand will dictate it.
Many brokers are finding themselves drifting about in a sea of uncertainty, wondering if they will still be in business due to the rising notion that wholesale business is sure to become a thing of the past. This self-serving myth is often perpetuated by industry leaders who are using this current climate to gain market share. Their lack of belief in those who made them what they are is shameful and we will not abandon our business partners when they need our support the most. What’s alarming is that many of those companies, who are pushing brokers to become net branches, are in fact wholesalers themselves.
“Have we have lost sight of the spirit of the wholesale model?”
Paul Rozo, president and chief executive officer of Paramount Residential Mortgage Group (PRMG) said, “I find this quite ironic to say the least! Many wholesalers are speaking from both sides of their mouth. Some of them are literally cannibalizing their own brokers by corralling them into their wholesale channels by playing off the broker’s fear-based notions, and ultimately leaving them no choice but to become part of their own self-serving net branch platform with the intent of hedging their odds against a broker/wholesale collapse. This is not in the best interest of the broker, the consumers or even that of the industry, especially at a time when we need to support our brokers the most.
Rozo continued, “I began my career as a broker, and have been disappointed over the last seven years by the lack of enforcement of the standards that I adhered to when I entered this profession. Have we have lost sight of what the entire spirit of the wholesale model is to begin with? It’s time the ‘professional’ broker reclaims their role within their communities, and as a wholesaler, we intend to help them do just this.”
“It’s time the ‘professional’ broker reclaims their role in their communities …”
Paul Rozo’s passion for the broker is shared throughout his company team members and is the cornerstone of their foundation as an organization. It is part of their culture to serve and their belief in the broker and is shared by other prominent industry leaders as well. “I have spoken with some very high level capital partners on Wall Street and investors in the secondary market, as well as executives at other large institutions who agree that staying true to a business model, which is ‘broker centric,’ allows wholesalers the ability to maintain loyalty and gain new broker partners that few will be able to emulate.” Said Rozo. As wholesalers, we need to believe in our brokers and continue to support them. It is also important that we continue to provide educational resources which remain second to none.
Commitment towards education and consumer outreach is paramount. As an example, PRMG demonstrates this in their funding of the Non-Profit HELP (Homeownership Education Learning Program) and their ongoing efforts to reach out to the public with such partners as the California Department of Real Estate (DRE), local community colleges, HUD, the Internal Revenue Service (IRS), district attorneys and local governments who all believe that consumer outreach and education is vital to moving our economy forward.
Choose to remain a broker!
So what about the net branch model? While net branches have certainly helped the small broker expand their possibilities, this usually comes with a great price! This includes, surrendering their broker's license, loss of commissions, and loss of freedom to choose and work with multiple lenders in selecting the best loan programs and rates for their clients. Essentially, the broker is virtually giving up their identity, culture and business autonomy to accept a rather so-called controlled and structured environment.
We’ve all heard it … I can’t get anything done around here!”
In today’s market climate, net branching is modeled to play on the fears of mortgage brokers to get them thinking that this is their only choice of survival outside of becoming an employee of a mega conglomerate national bank. And let’s face it, most of us know that big banks “bank” on their name and reputation and are generally not attentive to the needs of their loan officers who are trying to get that all important loan through the system. We’ve all heard it: “I can’t get anything done around here!” Nobody cares, nobody listens. The bank’s attitude is, “It’s our way or the highway.”
When the market was controlled by real estate-owned (REO) inventory banks could intimidate Realtors into requiring that all offers had to come from a direct lender. Now that short sales are dominating and Realtors are able to choose the very best professional lenders available, often they will turn to their local broker who has been part of their team for years.
With net branching, the broker loses the ability to broker a loan outside of the company inhibiting them from offering the best combination of price and service to their customers. In many cases, if a non-Federal Housing Administration (FHA) loan is allowed to be brokered outside, the net branching company will charge a significant fee, thus cutting into the broker’s profitability. Brick and motor offices have a significant cost and the originator pays for these costs. Brokers who are accustomed to being the customer often report being treated with contempt from their new “employers” when they demand excellence from those around them.
So, as a broker, you have to ask yourself … “Is it really worth jumping ship?”
We say, “No!” There are, in fact, wholesalers out there that will continue to stand behind mortgage brokers, wholesalers who believe that wholesale business will remain strong for years to come. That belief in maintaining long-term relationships by providing continued education and support to mortgage brokers, along with the best possible loan programs, service and technology in order to ensure they can succeed in today’s mortgage environment.
Keep your identity; choose to remain a mortgage broker!
Paul A. Lucido is national marketing director for Paramount Residential Mortgage Group (PRMG) in Corona, Calif. He may be reached by phone at (951) 547-6311, ext. 358 or e-mail [email protected]