I received a lot of emails – no one can say brokers don't band together – and many of them claimed the retail LOs had outdated views of the wholesale space. They bristled at the notion that brokers are not in control of the process or that retail has a brighter future when rates inevitably rise. In fact, they said, brokers have better pricing, more loan options, pretty advanced tech, and they are in a better position to lap up leads when rates rise.
A Colorado LO offered his take on the perception of wholesale from rank-and-file retail LOs.
"Just like leadership at numerous different retail mortgage companies and banks I worked for was spreading these same lies early in my career, the leaders of the current retail companies also have their staff eating these false narratives right out of their hand. I feel sorry for them honestly. The level of growth in both mortgage knowledge as well as closed loans is exponential when you get into the broker world.
The biggest lie they tell themselves and their staff is that they have more "control" over the loan process or that brokers somehow have less. The process from a production standpoint is exactly the same from start to finish...
...There are 4 main issues in retail that you don't have in the broker world.
- Retail will compartmentalize the entire loan process down to the most miniscule task and create the need for another person to touch the file. It's no wonder their turn times and customer service are so terrible and their margins have to be so high. I mean why would a processor order a payoff, title, mortgagee updates and flood certifications themselves? Obviously one needs to have a person designated for each of those tasks Individually. Who cares how many additional salaries are needed or how much finger pointing can go on when just one of those people makes a mistake on their one duty within a file? But it doesn't matter, the borrowers are just paying those salaries any way with higher rates and fees than those available to them through the broker channel. The amount of equity stripped out of borrowers' homes on a refinance by retail should be illegal.
- For some reason they must have at least 4 layers of bonuses/commissions paid out to every level of the sales staff on every file. Is Oprah running these places? You get 25 Bps, they get 25 bps, EVERYONE IN THE BUILDING GETS 25 BPS...gimme a break! Or better yet, give the borrowers a break! All this does is increase margins even more. And who does that effect? The borrowers!
- It either fits in the retail box or it doesn't, and if it doesn't, oh well. Deny that file and move on to the next. Half of the time when that happens it's already taken weeks to even realize the loan doesn't qualify. This is especially concerning on a purchase transaction when borrowers have earnest money on the line and contract deadlines to meet. As a broker you can easily pivot to another lender who WILL take that loan. Which brings me to my 4th point.
- There is a serious lack of mortgage knowledge in general within the retail space. This is mostly due to the compartmentalization of every single step they can find within the process. It's rare to find someone within retail who could take a file from start to finish (with only the underwriter as a teammate) if they had to. I've worked for enough retail operations to clearly see that this is by design by the way, not by accident.
Retail lending leadership knows that empowering originators with too much knowledge would undoubtedly result in them leaving for greener pastures.
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Here's one from an Arizona-based broker, who was quite content knowing that a lot of retail LOs will stay where they are:
"The less in the broker community the better for me! They don't know the wave that's going to hit them when rates start going back up, and us brokers do a gigantic cannonball in their proverbial purchase pool. Right now brokers are dominating the refinance pool because rates are lower in our channel. I'm educating so many borrowers as to why we're lower in rates and fees than retail. We're faster than retail and our tech is similar to retail. These borrowers will not be going back to retail...Clients are becoming more savvy in regards to rates and fees. They're catching on to the game of the reason why their realtor is pushing their 'mortgage person.' It benefits only the realtor! So I'm all for people staying in retail. It makes my job that much easier!
Not to mention, as a broker, we're multi-faceted. We can do both refinances and purchases and dominate the market. Retail LOs are stuck to mainly purchases unless they can convince their refinance client to not bother shopping with anyone else. The minute that client checks with anyone else non retail, they're not going back to that retail LO for a refinance.
With brokers I believe we do earn clients for life because of our pricing and customer service.
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The broker channel simply isn't for everyone, said one veteran broker.
"It seems you had plenty of loan officers who vowed never to be a Broker. And that's ok, not everyone can confidently originate loans on their own. I also think a few things about being a Broker are misunderstood. In fact, the amount of benefits and strengths one gains personally and professionally from being a Broker is enormous. I can honestly say, I'm in a far better position to control my life in more detail than ever before.
Working for retail is not right or wrong. It depends entirely on the professional. I feel being a broker allows me to own more accountability for my success. More integrity in my customer service. More dedication to ALWAYS doing the right thing because referrals from clients are my life blood. I own my marketing. I own my client database. I can build my own business with my integrity."
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I also received an interesting message from a mortgage broker shop owner in Florida. He said he started in 2005 as a phone rep, calling leads 8 hours a day. Then he worked for major depository lenders and small banks before taking the plunge into wholesale in 2017.
"I personally prefer the broker channel. The reasons for this are as follows: flexibility, pricing, options. There are certainly other reasons but when it comes to helping the consumer the three reasons, I mentioned are top 3 why I prefer the wholesale channel. So, what do they mean, let's start with flexibility – If one of my lending partners isn't able to do the loans due to their overlays, I don't have to deny the clients application causing them damage or making them go through a credit repair program and then possibly miss out on a good priced property? I can literally write loans with scores as low as 500, I have partners that will underwrite loans for borrowers who are self-employed, or other life scenarios that retail channel shies away from. Pricing – same thing. I can shop rates for my consumers to make sure they are paying the least amount in fees (points) to get the best rate available to them based on their overall application. This is something retail lenders have little to no choice and they have to offer whatever is available to them by their company..."
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Finally, one Georgia-based broker pushed back on the retail LOs' feedback about not having direct access to underwriters.
"For those bank LOs that think brokers have no control in underwriting I would say two things. First, learn your job better. If there's a problem with the file you should ID it up-front. If you are relying on an underwriter to tell you if your file is any good, that's a problem. My reps answer the phone almost 100% of the time and get me answers to the quirky stuff because they have access to the underwriters. One of my best lenders has a direct "ask the underwriter" e-mail that provides really fast answers.
Second, if you as a broker don't have access to underwriters or aren't getting quick responses you are working with the wrong lenders. Here we are in record volume territory and I'm getting 24 hour turn times from two of my lenders and 48 hours from another. That's a complete underwrite. However, I really don't want to dispel the mortgage broker myths about all this. I hope the LO's at the banks stay there. I love running circles around them with my pricing and service."
I received a ton of responses, so allow me to say a quick thanks to all the retail LOs and mortgage brokers who have messaged me over the last few days. I couldn't include all of them in this newsletter. I'll be writing a feature about the advantages and disadvantages of each channel later this month, so please keep the feedback coming and check back for more. You can always share hot news tips, rumors and complaints by emailing me at jkleimann@housingwire.com.
James Kleimann
Managing Editor, James Kleimann
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