Choose Wisely

Having delegated underwriting allows a lender to underwrite and fund a mortgage loan in-house, before review by any investors.

“Since it’s our staff, in fire situations, we’re able to prioritize what we want to prioritize, rather than being at the mercy of another institution,” Braun points out. “When you’re not delegated, it does add a little bit of complexity to the conversation, like hey, we’re waiting for X, Y, and Z company to get back to us. It seems like you have less control over the process.”

A con to this model is that the company is taking on most if not all the risk, by issuing its own credit decisions. It also must maintain a certain net worth requirement to have the ability to do delegated underwriting. During times like these when the market is tight, that can be difficult for some lenders. 

A self-described control freak, Braun still prefers the delegated model. 

“Not to mention when you’re going out and trying to build a referral business,” he adds, “it may seem that you’re at the mercy of other institutions, their turnaround times and their decision-making. I’m not saying that you can’t be successful being non-DEL. But these things do come up when communicating with consumers and potential referral partners. And for that reason, I think the originator is empowered by being able to go out there as a delegated lender.”

Sometimes a lender chooses to go non-DEL with certain files. In Braun’s case, it’s often for co-ops that he can get better pricing for out-of-house. 

“I think it comes down to risk,” he says. “With low FICO Scores or higher Debt-to-Income Ratios companies might say, let’s be non-DEL on those particular scenarios.”

It can also come down to a company’s staffing focus. If they don’t have a VA underwriter in-house, for example, they might go non-DEL on a VA loan. 

Nick Howley, senior LO with Green River Capital Corp. (GRC) in Plainview, N.Y., sees it through a different lens. As a licensed broker, GRC has no warehouse lines of its own, but access to about 50 different lenders. Oh, and also no in-house underwriting.

“Some people may use that as a benefit to go banker, but we do have direct access to all of our underwriters,” Howley says. “If a file comes in and I see the specific underwriter, I can reach directly out to that underwriter.”

Howley started his career over 10 years ago as a mortgage telemarketer. 

“I realized very early that the cold calling model wasn’t for me,” he recalls. “I treat every single client like this is my last deal. No matter what, you gotta shine on that deal. You gotta show the listing agent, the buyer’s agent, the buyer’s attorney, the seller’s attorney and the client – most importantly – that they made the right decision going with you.”

He also acknowledges that there are pros and cons to all mortgage models. 

“I believe it is not one-size-fits-all for each model, whether it be direct lender, retail bank, wholesale lender, or mortgage broker. I believe in the mortgage broker model for myself because we have lower margins which give us more aggressive interest rates.”

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Mortgage Models Explained

Mortgage Banker

Mortgage Bankers originate loans and conduct delegated underwriting with servicing, and/or non-delegated underwriting without servicing.

Mortgage Broker

Mortgage Brokers originate loans, and are licensed as mortgage brokers with no warehouse lines of credit.

Mega Broker

A Mega Broker originates loans with 25% or more of their business in the wholesale channel and roughly 250 licensed loan originators, at least 100 actively originating. However, as brokerages continue to scale larger, the bar for being deemed “mega broker” rises.

Hybrid Broker

Hybrid Brokers originate loans, and broker loans with warehouse lenders and bank loans with a warehouse line.of credit.

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Rate-by-rate

Large lenders compete for GRC’s business with interest rate offers. The company uses a loan servicing platform known as Loansifter.

“That gives us the availability to shop that client’s particular scenario between multiple different lenders,” Howley says. “And it allows us to be super-aggressive when it comes to interest rate.”

Of course, not every lender has an appetite for the same type of loan. Some spit out the lower-credit-score-FHA-types, while others can and will eat them for breakfast.

Broker-owner of Vogler Mortgage in Houston, Texas, Ben Vogler agrees that having access to a plethora of products from lots of lenders makes for a strong company.

“This flexibility allows loan officers to better tailor loan solutions to meet the unique needs of their clients,” he says. 

That translates into opportunities for LOs to earn higher commissions. 

“Commissions earned are typically paid sooner to the loan officer, bypassing the strict payroll cycles enacted by mortgage banking firms,” Vogler adds. 

Once a file is clear-to-close, its review and approval can be expedited by that same LO.

“This control over the process provides a smoother client experience and fosters a greater likelihood the client will do business again with that loan officer and refer them to their family and friends.”

Owning a smaller firm, Vogler and his only other LO enjoy the autonomy and independence of building their own referral networks and client relationships. 

“Overall, he says, “working with a mortgage broker can offer loan officers access to a broader range of products, increased flexibility, higher earning potential, quicker paid commissions, and professional support, making it an attractive option for many in the mortgage industry.”

He generates his own business, with assistance on marketing and technology. This is in contrast to mega brokers that employ thousands of LOs. 

“I tend to be very focused on my files, I attend my closings, and the loan officer that I have, I’m very hands-on with his transactions and assisting him in any way I can, from helping with group presentations to jumping in on a file that there might be some hiccups on.”

Just as some college students can thrive in a university setting, others prefer smaller class sizes and closer interaction with their professors. Especially when they’re just getting their feet wet in the lien pool, some LOs need more hand-holding than others. 

“I think it’s imperative that they identify a company that fits their needs,” Vogler says. “Working for a bank, when you close a loan, it may fall just outside of the last payroll period. So it could be another two to four weeks before you’re paid on that transaction. With a mortgage brokerage shop, we get paid at the time of closing. So at that time, we can cut a check to our loan officer for their work.”

As a mortgage broker with no warehouse lines, he works directly with a wholesale lender, 

averaging 14 to 18 days from application to clear-to-close. 

The Mega Broker

The first time Kristine Wake heard NEXA’s CEO on a company call in 2020, she wondered if it was the right choice to leave the correspondent lender she had worked at previously.  

“I honestly thought Mike Kortas was full of s**t,” says Wake, now director of NEXA’s training division. “I didn’t think he could deliver on the things he promised.”

The retail office she came from budgeted for its LOs’ marketing strategies, profit and loss reports and other expenses that come with the job. At NEXA that wouldn’t be the case.

“For me as an individual LO, I wasn’t benefiting from those items being taken care of on my behalf,” Wake explains of her job prior. “I benefited from coming to NEXA and being able to control the expenses I had. At NEXA I had the autonomy to choose what my expenses were.”

She finished out the year on a high note, earning more per loan than she thought possible.

“I ended up making quadruple with the same loans, the same volume and same clients the last six months of 2020 versus the first six months of 2020.”

She also wasn’t accustomed to having control over how her loans got processed, as the retail branch she worked at had a specific processor assigned to it. 

“When I brokered out, I lost half my commission, which wasn’t very big in the first place,” Wake says. “If we needed a lock extension I had to go through my branch manager and she was not always readily available.”

That can cost an LO a deal, especially if they have to increase rate because they lost the lock. 

“In the retail world, you are kind of held captive. You don’t have choices. In the broker world the lenders want our business, so they are always there to support us, be our partners…make sure the deal happens. Being able to not have to tell my clients ‘no’ was a huge win for me personally and professionally.”

There is a real fear among retail LOs that they won’t be able to make it in the wholesale market.

“The resource part of it was one of the reasons I stayed so long,” Wake recalls. “We were told this lie, if you go wholesale you’re on an island all by yourself. That was one of the biggest concerns for me leaving.”

She was pleased to find the opposite was true. NEXA provides its more than 2,300 LOs with around-the-clock assistance at LoanOfficerSupport.com. 

The old-school, brick-and-mortar model of business virtually disappeared during the pandemic across most industries. With it went consumers’ blind trust. 

“Our clients are more educated than they used to be,” Wake points out. “They understand that the interest rate has factors in it that change.”

Since consumers are savvier these days, LOs have to be, too. 

Brokering Better

Product availability and good pricing are paramount to Madison Mortgage CEO and President Shah Tehrany, of Lake Success, N.Y. 

“We’re big on taking care of our clients and giving them a great experience,” Tehrany says. 

“Some of the retail competitors of ours, their rates are a lot higher, because they have a lot of cost and infrastructure. Our pricing is exceptional, predominantly because the wholesale channel has exceptionally good pricing. Our capacity to execute is tremendous. Our company is really just structured around enormous support for loan officers, to maximize their efficiency.”

Madison Mortgage employs about 40 active originators, including LO assistants (LOAs) who work in a support capacity. Being 100% wholesale, the company brokers all of its loans. 

Tehrany believes that the system – combined with the concept of quality over quantity – provides him the best business model to be successful.

“We’re not looking for hundreds of loan originators like some of these models,” he says. “We’re more focused on having great originators and putting a ton of support around them. On average, these guys are writing 120 transactions a year.”

Harnessing the resources of a mega broker can be essential to success for some companies.

“A lot of these small brokers are dying and they need a life raft and companies like ours are throwing them,” says E Mortgage Capital CEO Joseph Shalaby. “A broker is better being independent, piggybacking on a massive ecosystem like ours or any of the big 10. We can help with marketing, recruiting, training, coaching, driving innovation, sales training, etcetera.”

At the end of the day, it’s not where an LO finds their footing, but how strong they can stand. 

“A good originator is going to be a good originator regardless of the model,” Braun says. “There are pros and cons to each of them, and I think you can be successful in all of them.”