Hello LOs,
The mortgage broker's star is undoubtedly on the rise – by some estimates the wholesale channel is expected to grow to 33% market share in the next few years, up from about 20% today.
Two of their dedicated lenders – UWM and Homepoint – are public now. And Rocket Mortgage, by far the largest mortgage lender in America, is spending somewhere in the region of $10 million to air a 60-second commercial promoting the broker channel on Super Bowl Sunday. (The Detroit-based lender has also unveiled a national directory for mortgage brokers, though a closer inspection shows that many of the companies listed are not mortgage brokerages, but community banks and other lenders.)
Let's talk about the broker lovefest.
*If you ask the wholesale evangelists, this is a sheer function of economics and cost structures. Paying all those branch managers, assistant branch managers, etc. adds up. It also means the retail lender spends as much time managing the branch apparatus as they do anything else. The wholesale model, evangelists say, allows them to closely focus on the platform and technology. No distractions, and they have to be good to win broker business. True capitalism!
*Wholesale evangelists say they'll grow by absorbing business from top-producing LOs at big IMBs, to LOs at big banks, and all the way down to LOs at overmatched regional and community banks.
*It's no coincidence that Guaranteed Rate bought Stearns. Aside from the JVs, it gives them access to the wholesale channel, which is generally seen as a strong performer in a purchase market.
*I don't think we've actually yet hit the inflection point for the broker channel. All those refis have kept retail LOs very busy, and many of them have very strong relationships with local real estate agents and can scoop up purchase business. But what happens when the refis slow dramatically? Can the retail structure keep up with wholesale? That's when I think we'll find out if those wholesale evangelists are correct.
Retail LOs, lemme ask you: Would you consider switching sides? If so, why? If not, what gives you confidence that the retail model works best for you? Email me anonymously at jkleimann@housingwire.com.
James Kleimann
Managing Editor, HousingWire
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