As a mortgage broker, you have been operating as a free agent. You are a professional, and work long hours to bring together lenders and borrowers. You job is to evaluate and analyze each person's credit situation to determine which lender is the best fit for their needs. You have the flexibility to submit the application to one or more lenders in order to sell it, and work with the chosen lender until the loan closes. You have been an extension of the lender … the low-cost provider and friend to the borrower. It is because of you that most lenders made the top lists of loan originations.
Now, the game has changed. Recent regulatory changes have threatened your existence. You have been contemplating joining a branch operation to navigate this regulatory and compliance maze. You want to continue to earn a respectable income to support your family. However, you hesitate because you don’t want to lose your flexibility. So you ask yourself, “What should I do?”
You joined a traditional branch operation and found it to be an expensive proposition. You rent office space, hire and train loan originators, and begin marketing. You submit your loan and wait. You assume that closing your loan will be quick because this branch operation has closed billions in loan volume. However, you find that you are a small player in a big game and they don’t need you to score to win the game. You are expendable and not valued by the operation. Your loan is denied and you have nowhere to turn—no income to support your family.
I have spoke to many loan originators who are excited about joining a branch operation only to find that they have joined a different branch operation a few months later because they weren’t making any money. Therefore, as an LO, you must consider all of your options and the right option for survival moving forward.
As an owner/originator, I understand the drive to get every deal done. That is why I have adopted the small mortgage banker/virtual LO model. This type of operation will give you the power and pricing of a banker, but the flexibility to broker loans that cannot be funded with the warehouse line. You have the best of both worlds.
The virtual LO model is less expensive than a traditional branch. Instead of spending valuable resources on a large office space, equipment rental and payroll, you invest in a small office, an assistant and marketing. You build a team around you and grow your referral base (realtors, CPAs, financial planners, attorneys, etc.) and you build your operation with Internet lead Web sites. You don’t have to be concerned with net worth, audited financials or regulatory compliance. You will find that you are an equal player in a big game, and when you score, it helps to win the game. You are not expendable, but are valued by the operation and you can support your family.
As an industry, there are many wholesale lenders and government agencies who believe in the broker model in its purest form. They believe that brokers will one day dominate the mortgage industry. They know that brokers provide volume without the overhead. This is the least expensive way for them to gain market share. In addition, this is a way for you to dominate your market … create your brand and be the trusted advisor that your family, friends and clients have known you to be. Build your origination business.
I don’t want to minimize your potential, but as a virtual LO, you can maintain a respectable lifestyle with five to 10 loans per month. Partner with a small mortgage banker that offers you the pricing of a lender and the flexibility of a mortgage broker. We have found this option to be the most effective when transitioning from a typical mortgage brokerage to mortgage banker, so don’t give up on your dreams.
Erick Parker, CMC, CRMS is president of Akron, Ohio-based Third Financial. He may be reached by phone at (330) 535-6005, ext. 209 or e-mail [email protected]