NEXA Mortgage CEO Mike Kortas revealed that Axen Mortgage LLC, a non-delegated correspondent lender and DBA of NEXA Mortgage LLC, is merging back together with its parent company as part of an effort to create a more transparent banker-broker hybrid business model.
“It's the same exact company, but the model was built around a non-delegated correspondent [model],” Kortas said, describing Axen Mortgage. However, he added that he was not immediately taken with the idea of incorporating a non-delegated correspondent model.
“I didn't want to [have] a non-delegated correspondent [business]. I hated everything about it – It wasn't me,” Kortas said. “Originally, when I opened up NEXA, I told all Nexans I will never be anything other than a broker. If we ever turn into anything other than a broker, you know I got selfish. Pack up your license and get the hell outta here.”
But it can be hard to say anything will remain the same in the mortgage industry, given that the housing market is in constant flux. The tide began to turn in late 2022 when the sudden increase in interest rates eventually caused many in the retail channel to transition into the broker side of business – a trend Kortas could not ignore.
“I'm a broker, it's what I do, right? But loan officers wanted it,” Kortas said. “The reality is, in order to get the big branch loan officers [and] the mega producers out of retail, you had to have it. They understand that model more.”
Many top producing originators in the retail channel that control large teams refused to join any company that wasn't a non-delegated correspondent, Kortas said, which provides branch managers more flexibility in their margins. Kortas said he agreed to implement some non-delegated correspondent business, though it’d remain separate from NEXA Mortgage and exist under the name Axen Mortgage – which is NEXA spelt backwards.
“I hate it because these brokers are doing the same thing that the retail companies were doing to loan officers for years,” Kortas said. “I implore anybody who is a non-delegated correspondent to share the purchase invoice and the coupon with their loan officers, so the loan officers know exactly what they're padding the rate by.”
Kortas refers to interest rate padding, in which a lender increases the interest rate on loans beyond what a borrower is actually qualified for. Lenders “pad” interest rates, at the borrowers' expense, because higher rates lead to a higher profit margin.
“It’s a complete abuse of loan officers,” Kortas said. “[At NEXA] we share the purchase invoice and coupons on every single transaction so that loan officers absolutely know I did not pad that rate.”
Yet, Kortas claimed that many of his broker and mega broker competitors that use a non-delegated correspondent model are padding their rates unbeknownst to their loan officers. However, he named Edge Home Finance Corp. as the exception among mega brokers, saying they “are truly transparent and I like that about them.”
“If you can name them, they're padding their rate sheets,” Kortas alleged. “Some of them are padding by 20 bps, and some are padding over 40 bps…They might have the same rate sheet that I have at United Wholesale Mortgage, as an example, but their rates are higher than mine. And that's because they pad their rate sheets and they hide it from their loan officers through the margin.”
Kortas defines a “true broker” or a “pure broker” as one that practices and upholds transparency.
“The brokers who go correspondent are not acting in the capacity of what a broker is,” Kortas added. “To me, a broker has always been truly 100% transparent. Because federal law states you must disclose what the company is making in total. Where in a non-delegated correspondent environment, you can actually hide that.”
But that’s just one mega broker sharing their opinion, since the labels “true broker” or “pure broker” are no more legitimate than "mega broker." Rather, they're labels made up by the broker community to categorize various brokerages and the way they do business. Those who plan to attend the Originator Connect conference in Las Vegas, NV, can hear what NEXA’s competitors think about this topic and more when Broker Brawl Returns, August 16.
