NEW YORK: How To Conquer - Not Fear - The Empire State

For most brokers who began working in New York after 2008, it’s not easy. As detailed in an article in our sister publication, National Mortgage Professional Magazine, “I Hate New York,” there’s plenty of reasons why loan officers and companies avoid this state like the plague. But this aversion also creates an opportunity for brokers who are willing to put in the work and have patience dealing with the New York State Department of Financial Services (DFS).

Trust that it may be hard working in this particular state, but the brokers that do are far from miserable. Tehrany is one of United Wholesale Mortgage’s top broker partners, bringing in close to $400 million in volume last year, according to Modex, and a majority of his clients are located in New York.

Patience Pays Off

In New York it takes a while to get a broker license — anywhere up to 18 months, at times. First, Tehrany made the transition over to his friend’s company, helped him grow a little bit, and then filed for his broker license. Luckily, he was able to get it in nine months. Then he transitioned over to Madison Mortgage.

“New York loans are harder, there’s no question about it,” Tehrany said. “Predominantly just because of the demographics of this area, and the way that New York’s loan business is transacted where a purchase typically would take anywhere from 70 to 90 days to close.”

In markets like New Jersey, Maine and Connecticut, where Madison Mortgage does a lot of business, contract to closing can take 30 days.

Mainly, what causes the hold-up is the fact that every purchase transaction has to be overseen by three attorneys — the buyer’s attorney, the seller’s attorney, and the bank attorney. The loan officers perform with as much speed as loan officers elsewhere, but the coordination and logistics behind each transaction is more complicated.

“It’s just a much different game here in terms of how quickly you can get into contract and how long it takes to actually execute transactions,” Tehrany said.

Many of these more stringent regulations were implemented after the 2008 financial crisis. The banks needed to be strengthened to better protect borrowers and the mortgage industry from facing a similar collapse in the future.

“The New York [State Department of Financial Services] is amazing at these regulations and implementing them. And in New York, I mean, I think it’s one of the safest places right now to buy,” said A.S.A.P. Mortgage CEO Irene Amato. A.S.A.P. is based north of New York City in affluent Westchester County.

Similarly, Tehrany has an appreciation for the financial services department and believes these regulations are necessary to create a safer lending environment. He said the department does a good job of making sure that the people who do business there are responsible.

“I mean, it is the financial capital of the world, right? So, you know, they take it a little more seriously,” Tehrany said.

Originally, Tehrany worked on the retail banking side before transitioning to become a broker. One of the reasons he switched was because he noticed a demand for less conventional loan products and a lack of brokers in the community to help consumers navigate their options.

Competing with Big Banks

Banks dominate the New York mortgage market, but brokers are absolutely necessary to provide consumers with more unique options and allow them to save more money.

“I think the average is like $9,300 cost savings per transaction using a broker versus a retail competitor,” Tehrany said. Data from the Home Mortgage Disclosure Act shows brokers save borrowers $9,400 compared to retail lenders and mega banks. “Because they (retailers) have a lot more overhead, especially if they’re not at massive scale. It’s costly for them to transact, so they have to have higher margins to be able to make money.”

Brokers, on the other hand, are focused on making a reasonable margin to stay competitive. This is more beneficial for consumers; it’s what makes them come back for future transactions and recommend their broker to friends and family members. Tehrany said the average consumer transacts seven times on a single mortgage in their lifetime, and the broker is focused on servicing all seven.

Each broker chooses their compensation rate with a maximum of 3%. Amato’s compensation rate is 2.5%, which is a bit more competitive than brokers who charge 2.75%.

“Brokers across the board, even if we’re at the maximum compensation, offer better and more competitive rates because we’re getting a wholesale rate,” Amato said. “There’s those few specific programs or products that certain lenders will offer that may beat us and that’s when the brokers should say, ‘Go to that program, we can’t beat it.’”

Diverse Borrowers

Additionally, the fact that New York hosts such a diverse population of people in terms of socioeconomic status and ethnicities means they’ll likely need a diverse array of mortgage product options as well.

“You see a lot of different types of people,” Therany said. “We’ll do a loan for an MTA bus operator and a loan for a Goldman Sachs investment banker … but that’s just a function of the wonderfulness of New York.”

There’s also a significant amount of self-employed borrowers, especially after the pandemic triggered a surge in the number of entrepreneurs. The latest data from the New York Department of Labor shows 9.8% of residents are self-employed in 2021. The 2022 report shows that many of these people work in arts, design, entertainment, sports and media; personal care and service; construction and extraction; legal; as well as building and grounds cleaning and maintenance. From 2021 to 2022, the number of business startups rose from 253,666 to 309,163 — the biggest jump in over a decade.

“The ratios also tend to be a little bit higher, because the cost of homes relative to income is just higher than some other areas like Maine and Connecticut, and parts of New Jersey,” Tehrany said.

Above all else, what makes brokers so necessary in all markets, and not just the New York area, is that they work for the consumer rather than the lender. Amato has a story that demonstrates this perfectly. A client called her during the refinance boom in 2021 because he was on the fence about whether or not to do one. His local bank had already approved him, but he wanted to ask Amato if A.S.A.P. Mortgage offered better programs. It turned out that there was no benefit to the borrower to refinance, so she told him exactly that.

“Then about a week later I got this review saying, you know, how excellent myself and my company was. … He was writing it because we actually advised him against coming to us for a mortgage refinanced,” Amato said.

New York Broker Unity

Outsiders may think the mortgage world in New York is as cutthroat as driving an Uber in Manhattan, with people willing to cut you off at every corner. But that’s not entirely true according to Amato, who has been a broker/owner in the state since 2001.

The broker community was a bit different back then, she said, and brokers generally fell into two categories: what she calls “true brokers,” and the others she describes as more cutthroat, but to their own detriment.

“Listen, when you have money involved, and people are trying to run their business, there are brokers out there that take deals from one another,” Amato said. “But there are some brokers that will actually call each other up and say, ‘Hey, you’re working with so-and-so. He’s a great guy. Stay with him.’”

Amato describes it as a very tight-knit community in New York, so brokers are better off trying to play nice in the sandbox rather than cut each other down. New brokers especially should respect and offer help to their broker compatriots rather than be intimidated by them, even if their proximity is just a mile down the block.

For example, a client is issued a pre-approval after two months of working with Broker A, then goes to Broker B to shop around. Both brokers want the deal but neither wants the client to go to a bank. So the brokers might work out who should take the client, but that doesn’t always mean Broker B will steal the deal. Still, some level of cooperation is the norm among this community.

Their closeness may have something to do with the financial crisis. New York was the epicenter of the 2007 housing crash, abrupting the lives of mortgage professionals and American citizens across the nation.

Bad Movies & Media

“I came home with a knot in my stomach every day for all of the people that were getting laid off and losing their jobs from banks and the way that the people that were losing their homes, and it was just a terrible time for us all,” Amato recalled.

Worse is movies and media painted brokers as the culprits of this collapse. For example, “The Big Short” portrayed brokers as slimy salesmen who took advantage of immigrants and lower-income citizens by knowingly offering them faulty subprime loans. But that is a gross misportrayal of the truth, Amato said.

While the movie had some partial truths, it was a disservice to “true brokers” who care more for their clients than they do about making a buck.

“Brokers felt awful every day for almost a year,” Amato said. “True brokers, I like to say, fought through it,” Amato continued. “And maybe that’s what bonded us. And till this day, it’s still in existence. And I feel that, like I said, it was very disheartening watching it happen on multiple levels, but it made us stronger and better and bigger.”

Those not working in New York might be inclined to think the state is suffering due to the large numbers who left during the pandemic, but now that workers are returning to the office, people are coming back to big cities.

“We are seeing more people funneling back into the cities, but it was a mass exodus,” Tehrany said. “We were doing tons of loans in the suburbs. We were seeing a ton of our clients, our past clients moving to Florida, and got licensed in Florida. It was the second state we got licensed in. … but now we’re seeing people come back in.”

There’s plenty of advantages for brokers working in New York, but anyone who works there will admit it’s not for everybody.

“What does the song say?” Amato asked. “If you can make it here, you’ll make it anywhere.”