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To Broker Or Not To Broker: That Is The Question

To really succeed, you need the mindset of a CEO

Dave Hershman headshot
Dave Hershman
Choosing career path

What goes around comes around. During the real estate boom of almost 20 years ago, brokers held a market share of over 50% of the industry. Then came the financial crisis, followed by Dodd-Frank and a whole host of regulations. Banks dominated, with the broker share moving down to just north of 10%. As recovery ensued, the huge bank market continued to drop gradually and the growth of non-bank mortgage companies grew significantly, especially during the refinance boom times of 2020 and 2021. The broker segment recovered as well but never reached the heights of those boom times.

In 2022, the growth of the industry screeched to a halt. Several mortgage-dominant banks have retrenched and altered their focus. The independent correspondent lenders don’t have the choice to focus on investments or credit card lending. Thus, they cut their overhead severely and either survive or fade into the night. With lower overhead to begin with, it stands to reason that the broker industry would also gain from this evolution as loan officers with non-bank companies go out and open their own businesses. The growth of Non-QM products continues to contribute to the trend because they provide the niches which help brokers thrive.

Thus, for the second time within a decade, I am writing about a major decision many loan officers face. Do I want to start my own company or join a small brokerage shop?

And the answer is quite the same. For every loan officer within this industry to succeed, they need to view themselves as the CEO of their business. This is true whether they work for a large national bank or are running their own brokerage shops.

Do you think you have a great job in the mortgage industry? Or do you view yourself as the CEO of your own business? If you really want to succeed, you must view this as your company. That also means you must invest significant amounts of your money, time and energy in your business. And you must make this investment up front, not later. So, here is the basic question: Are you investing what you need to in your business? Take my word for it — if you are failing as a loan officer because you are missing the investment you need, you will also fail as a broker. Especially in this market.

Again, referring to the example I brought forward during the recovery from the Great Recession. Imagine if you were opening a retail store or restaurant. You would invest many thousands of dollars and hours before you rang up the first sale. This would include hundreds of hours of research and setting up the location. And when it was open, the hours would be substantially greater. In the end you would still be in an industry that has a high failure rate even with this effort.

People in the mortgage industry don’t have to invest as many hours or as many dollars as you might in starting a restaurant. But the concept is much the same. What do you need to invest in? Marketing, education, technology and more. Perhaps it is time to learn how to use a software program you have purchased. Imagine running a store without the technology you need. Imagine running a dentist’s office without the knowledge or technology needed!

The investment needed would vary for each person. For example, a Realtor of eight years moving into the mortgage industry would not need to attend a real estate licensing class as an investment in their knowledge base. On the other hand, someone moving from the insurance industry might benefit from that class. After all, you are serving real estate agents if you are a loan officer. You need to become an expert in what your targets are doing so you can deliver maximum value.

Some will need a home office. Others will need a marketing assistant. It is this needs analysis that is an all-important research step. When I counsel managers, I counsel them to hire candidates who understand they are not applying for a position but to start a business. The manager must make these candidates understand what investment must be made for each individual.

And keep in mind that we are not just talking about investing money here. Money is important. But investing the time and energy in your business is just as important. Buying a bunch of stuff and then working 20 hours per week will be a waste of your money.

Those who wait for their employers to give them the resources to be successful will typically have a long wait. Success comes from within. And the key to this success is finding the right elements of investment that are needed for each individual. That is what a good manager or coach should help you do. But they can’t spend the money, time and energy to make your business thrive. Only you can do that.

It is only at the point that you have invested what you need, that you then can face the question of whether you should work for a bank, a correspondent lender or a broker. Or you should open your own company? If you have invested right from the beginning, you will be making the decision from a position of strength, instead of desperation. Every level will require the same investment to succeed. If you are ready to step up and start a brokerage company – the transition will be much less daunting.

This article was originally published in the NMP Magazine April 2023 issue.
Dave Hershman headshot
Dave Hershman

Dave Hershman is an author for the mortgage industry with eight books and several hundred articles to his credit. He is also senior vice president of sales for Weichert Financial Services, head of OriginationPro Mortgage School and a top industry speaker.

Published on
Apr 03, 2023
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