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Banks vs. brokers … don’t get me started. I have been a broker for more than 20 years now. Call me a dinosaur. I owned a large broker shop who flirted with being a lender for a while. I worked at a federally-chartered bank for a bit, but now I am back home being solely a broker. I just cannot stay away from being a broker. It is just so much better.
To decide which is better, you have to look at it from the customer’s point of view. At a bank or acting as lender, we only had a few correspondent relationships, because much more than that would drive the underwriter crazy remembering all the rules, nuances and overlays of each particular lender. As a broker, we have about 50, and we are a very small shop. At my old company Carteret Mortgage, we were a much larger shop and had more than 300. The feeling was that you never want to say to a real estate agent, “No, we don’t do that type of loan.” At the bank, I found myself saying that a lot. As a loan officer, that phrase actually costs you money. To a real estate agent or a borrower, that means, “Go on to the next loan officer,” and many times, they never look back. Good luck trying to get business from that person again. All they will remember is that you were not helpful. Conversely, I have done tough deals for real estate agents before and they have sung my praises in real estate agent meetings, referrals and edible fruit arrangements. Saying “yes” just gets you more business.
Let’s face it … being a lender is a numbers game. You need to have high volume to pay the overhead. Who do you think is set up better, a nationwide wholesaler or a medium size lender? As a loan officer, you might not care about the profitability of the company where you work, but you should. The company’s profit is directly related to your commission split. If their overhead is large, guess whose split suffers? Lenders tend to forget where their loans actually come from. Suddenly, you are required to bring in more business, but your compensation seems to be getting less and less, and your bonus quotas getting higher and higher. Brokers tend to pay a higher split, so you make more per deal. More per deal reduces the amount of loans you need to do to make a decent living. This is especially true in the lean times. When there are less deals out here, lender loan officer turnover goes up. Loan officers can weather the storm better. That’s because as a broker, I am not paying for the owner’s private jet and the 10 levels of executive vice presidents between me and the boss. Also, having lower prices helps you get business.
Not so that I sound so one-sided, let’s talk about the benefits of working at a bank.
There is some sort of myth among real estate agents that you can get a tougher loan approved or loan closed extra fast because you are “friendly” with the underwriter or closer since you work at the same place. If you actually work at a lender or a bank, you know nothing is further from the truth. Still, it is a good myth to foster, since it gets you more business. I tend to send most of my business to a few places. Even though I can get the same expedited service when needed, it doesn’t sound as good coming from a broker rather than from a bank employee.
If you work for a “famous” bank, there is some instant credibility from the company logo on your card. That’s nice and yes, it will get you some extra business. Most real estate agents and borrowers have never heard of the company where I work. It’s like having a card which reads “Joe’s Bar and Grill and Mortgage Company.” But as an experienced loan officer, I no longer rely on the company namesake for business. Almost all my customers are referrals now. I doubt any of them even know the name of the company that holds my license. All they know is that Eric Weinstein is doing the loan.
There was a time when brokers did 80 percent of the mortgage business and banks did 20 percent. After the financial meltdown, mortgage brokers became the “Bill Cosby” of the industry and the government tried to regulate us out of business. I may be a dinosaur, but I still believe in the mom and pop model of doing business versus the “Big Bank-Give-Them a Bailout” model we have today.
There was a time when I thought the financial meltdown was the killer asteroid to come and make all of us broker dinosaurs extinct. Now I realize, many dinosaurs are still around, like the alligator. We may not be as big as we were. We may not rule the Earth like we did, but we are still around.
Only you can decide what is best for you. For me, “Shriiiiiiik”, or whenever sound a dinosaur made back then.
Eric Weinstein worked in banking, on the commercial real estate side until 1991, when he fell in love with residential lending. In 1995, he started a small mortgage company in his basement called Carteret Mortgage Corporation, which in 2003, grew to one of the largest mortgage broker companies in the United States. Eric is semi-retired, doing mortgages by referral only. He may be reached by phone at (703) 505-8692 or e-mail firstname.lastname@example.org.
This article originally appeared in the August 2015 print edition of National Mortgage Professional Magazine.