Over the last several years the press and pundits had written off mortgage brokers as a business model that was dying. Kern Lewis of the SF Banking Industry Examiner reported last month that lenders were buying loans from intermediaries (brokers and bankers), with business up 28% from third quarter 2008 to third quarter 2009. Why is the business model coming back? Simple. No overhead.
Mortgage Brokers Are an Asset to Lenders
What you need to understand is that mortgage brokering was the first outsourcing of mortgage services 30 years ago. Lenders thought that if they could get a cheap sales force to send them loans that would be more profitable. Think about it: If a lender doesn’t have to pay to keep floor space, lights, a computer, toilet paper, coffee and benefits for a mortgage salesperson, it can make more on each loan. So it outsourced everything but underwriting and document drawing to someone who would find the consumer, teach the consumer, hand-hold the consumer, and close the consumer and never pay that person unless the loan arrived at the bank. It’s coming back into fashion. Why?
* Cheap sales force, easy to roll out new products.
* Brokers build stronger relationships.
* Brokers are more dependable, educated, and knowledgeable.
My favorite part of the article? An author singing to the choir. This is what I have been saying for a year now: “Plus, the brokering industry is curing itself naturally of its worst faults. During the real estate boom, all kinds of people flocked into the mortgage business, many of whom received little training and had no real industry knowledge. Those folks are gone, leaving the grizzled veterans who understand the business model and will do the right thing for the customer because they understand the value of long-term relationships.”
Have you called your friendly neighborhood mortgage broker lately?