Alright, let's get on with it. Here are some thoughts from three retail LOs who once worked in wholesale:
"I'd never move back to the broker channel," one California-based LO said. "The lack of control in any part of the process is a nightmare I don't want to deal with, and in doing volume, I may get paid less per transaction than a broker, but having corporate/retail level support allows me to easily do a lot more volume (and build up a bigger database faster) than broker counterparts."
The California LO, a former mortgage broker, pointed to three main issues that he says the industry hasn't addressed.
- "Bigger paychecks attract LOs just chasing paychecks without regard for whether they're good or not. We've lost several LOs to wholesale the past couple years, and with few exceptions, those who have made the move are NOT good LOs (they don't know guidelines, can't structure a deal, and the appeal to wholesale is "I can survive off my 1-2 units with broker checks and I can't with retail checks")
- Wholesale lenders often run into problems that leave brokers stranded with NO control over their loan files, and their customers are stranded with them. It happened last year when COVID hit and some wholesalers couldn't react quickly enough. It happened with Sprout wholesale this year – we had a customer we couldn't close until they closed another transaction (they were referred to me by a broker friend, and we were waiting on the broker to close his loan so we could close ours — it took 60ish days AFTER we were clear to close, because the wholesale lender ran out of credit and couldn't fund the borrower's loan until their lines were replenished — it took MONTHS, and the customer had few choices, and the broker had none, except to wait, wait wait….)
- The lack of control is not very real-estate transaction friendly. When I was a broker there was nothing worse than waiting for an underwriter or trying to talk to an underwriter about a condition and getting NO response as timelines got tighter and tighter. The lack of control, and lack of accountability of the wholesale lender to the broker was a very frustrating experience, and brokers being brokers, continue to work with wholesalers who treat them terribly all for the sake of 'the lowest rate' or 'best pay'
A Florida-based LO told me she absolutely wouldn't go back to being a broker in this environment. To her, it's all about control.
"The only place to be (in my opinion of course) is a Non-Bank Lender," she said. "I have done it all, worked at BIG Banks, private banks, local banks, owned my own brokerage, and worked for brokers. The name of the game in this market is knowing what you can and can't get done. It helps you manage time and relationships, and there is never enough of either!
Here are the HUGE benefits I have currently in my world:
- I have direct access to our team of underwriters, processors, and closers.
- If I have a question about a COVID overlay — I can ask the question and get an answer
- I have my whole team available in Microsoft Teams — and I always get a response.
- When one of my past clients is shopping to inquire about a refi — our system sends me a notification….. It gives me time to reach out and see if I can help.
- If I have a client who has post-closing issues — I have a servicing team to help.
- I have the best CRM on the salesforce platform — that multiplies my efforts and works for me while I sleep!
Those to me are all great reasons to pass on being in a traditional broker set up, at least for now!"
A retail LO based in Colorado told me he wouldn't go back to wholesale for similar reasons.
"As a mortgage broker you have NO control over underwriting, closing, and funding which makes it incredibly difficult to build and maintain a referral-based business," he said. "Your business model needs to be based on being the lowest cost like Walmart is."
Similarly, a number of brokers said they are thrilled to be in the broker channel.
"As an LO I would not go work for a Bank or retailer," one told me. "Part of the reason I became an LO was to enjoy the freedom that comes with being an LO and not being in a traditional bank or call center environment."
He added that he was confident he will thrive after rates normalize because it's a relationship-driven business.
"The most gifted sales people in any industry are the ones that sell wants & needs by making complicated things simple. On a lot of levels, good LOs provide more information to the consumer on products and services than retailers and banks. Anytime you are selling a superior product for a comparable price the key to winning the deal is having an educated consumer. I feel it would be tough for someone to argue that banks and retailers are willing to or are currently in the practice of educating their customers as it relates to mortgages and real estate."
Brokers, let's hear from you! Are these criticisms valid? Do you feel you have enough control over the process? Are there things you would like to see change in the wholesale channel? Hit me up at jkleimann@housingwire.com.
James Kleimann
Managing Editor, HousingWire
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