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Are mortgage brokers a dying breed?

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Mortgage Professional America | 19 Mar 2015, 08:15 AM Agree 0
The housing market is picking up, slowly but surely, and so is construction spending and commercial and homebuilding. But what about mortgage brokerage?
  • Cheryl M | | 19 Mar 2015, 10:07 AM Agree 0
    Of course they are, doesn't that speak for itself...?
  • Otto Jorge - ForrestTrust.com | | 19 Mar 2015, 11:13 AM Agree 0
    All I can say is that after 20 years in this business its very apparent the government wants the brokers out. 2.75% is NOT enough to make a decent living when you factor in hiring, rents, lic, compliance and all the overall cost of running a mortgage shop. Lets face it we do a lot more than the article gave us credit for. Were more astute, professional knowledgeable and offer more lending choices than the banking counterparts. I don't see any bank offering a Freddie 1 yr self-employed mortgage with 5% down... The complexities of the lending choices and the time we take to structure deals doesn't merit our set in 2.75% compensations. MB COMPENSATION REFORM NOW! Why should an LO earn the same thing if not more 3% and not have all the responsibilities and liabilities of running a mortgage shop? Lets get something started people, we need some compensation reform so we can all afford to purchase Health Insurance for our families too, feel free to contact me and get this going.
    otto@forresttrust.com

    Otto Jorge - ForrestTrust.com
  • Joe Prevost pioneer-funding.com | | 19 Mar 2015, 02:40 PM Agree 0
    The CFPB implementation of the Loan Officer compensation rule proved again the bank lobbyist write the rules. Why is a client disclosed to differently depending on where a mortgage officer works? How and why did the actual implementation of Dodd/Frank through the CFPB lead to if the mortgage officer works for a bank, Lender or creditor they don't have to disclose the compensation gained to the prospective borrower.

    The entire mission of Dodd/Frank was to provide more clarity to the borrower while clearly identifying the compensation paid to the originator and their employer. This did not happen. CFPB interpreted the Dodd/Frank law and made the current rule that allows banks, retail mortgage operations and lenders to hide compensation from the shopping mortgage customer and make the mortgage broker appear to be the most expensive up front option in the entire marketplace for at least the last 3 years.

    Those are the undisputed facts.

    Specific trade groups representing the mortgage broker industry have repeatedly asked for "equality in disclosure" in the marketplace the CFPB has to date not ever addressed the concern. Currently the people originating as actual mortgage broker's are the only ones in the marketplace disclosing the entire compensation made on the mortgage to the borrower.
  • Aaron VanTrojen / Geneva Financial, LLC. | | 21 Mar 2015, 12:29 PM Agree 0
    Brokers were never forced out of the business. Yes, some ran poor business models and had to close, but that was not a result of being a broker. Bankers and banks failed just as fast. Many brokers shut down because they were misinformed, and uneducated about pending regulation. The "sky is falling" for brokers was myth. Those that survived the great financial collapse will tell you the same.

    Many of the bankers (and their employees) still do not realize that you can make a great living brokering mortgages. 2.75% compensation is more than enough. While bankers can make more, their operation costs are far far greater than that of a mortgage broker. Brokers still have access to the most aggressive pricing, most mortgage options, and if you are a competent mortgage officer, you can close mortgages fast through wholesale channels. Just pick your wholesale partners well.

    I started my career with a mortgage broker in 2001. I started a mortgage bank in 2007. I run one of the only mortgage banks in the nation that actually promotes mortgage brokering. We pay our mortgage officers the same whether they broker or bank so we do not steer our employees. We bank 70%-80% of our business because we do not step on pricing, as I have to compete with my own wholesale partners. We will always offer wholesale channels because brokering is alive and well (or at least should be), and many times it is the best thing for the client.
  • Otto | | 25 Mar 2015, 03:44 PM Agree 0
    Hey Aaron, you should'nt say that 2.75% is enough to operate a MB Business, because according to what you wrote you are a Banker, not a MB broker. 2.75 is great for the mortgage officer, but for someone that operates an MBB, its just not enough to make a living and hire and be competitive. Sure if your avg mortgage amount is $417k thats great! So you should not comment as if you are in our shoes, those of us that operate an MBB. Also many brokers didnt shut down because they were misinformed, they shut down because they had mortgages, rents, bills to pay and families to maintain and there was just no business to go around. They banks stayed open because the bank were bailed out with OUR money, only to make the big banks even Bigger. The small community banks and even the regional players are being punished and beaten down. I know a fair amount of board members, shareholders and CEOs in the space and the sentiment is all the same. Back to the MBB issues of 2.75%, no its NOT enough. Hey why dont you try working on a 2.75% margin across the board, 2.75 minus expenses, LO Comp, operating budget ect... and liability of buy backs. If you are one of the few that operate in a part of the country that this works for you then GREAT!

  • Joe Prevost pioneer-funding.com | | 25 Mar 2015, 04:59 PM Agree 0
    Why is a client disclosed to differently depending on who is originating the mortgage?

    Is it in the prospective borrower's best consumer protection to not know what the mortgage banker is making on the origination of the mortgage being disclosed to them.

    This doesn't make sense per the directive and creation of Dodd/Frank. The CFPB changed the disclosure rule on the origination of all mortgages in the LO Comp rule of 2011 and it benefited mortgage bankers very well. They disclose zero origination points make the note rate to the buyer .25% higher and pocket between 2-3 points per mortgage and the client never knows it.

    Why did the CFPB allow this to happen.

    I have never made 2.75% on any mortgage I have ever done and I would consider that price gouging.
  • Enotiva | | 23 Jul 2015, 05:40 PM Agree 0
    Are you wholesale in Florida?
  • ID | | 03 Oct 2015, 01:30 AM Agree 0
    Great article...mortgage brokers got a raw deal but hopefully with TRID it evens the laying ground a little bit. Funny how a mortgage broker can offer a much better deal to the borrower but yet has to disclose their comp while a bank can rip off a borrower and doesn't have to disclose anything. Crony capitalism?
  • MBAS | | 07 Nov 2015, 02:13 PM Agree 0
    There will always be a marketplace for brokers. CFPB, GSEs and other regulatory bodies are creating transparency and holding everyone accountable involved in the mortgage manufacturing process - origination to servicing. There will always be a market for a mortgage brokerage firm, however, Mortgage Brokers MUST change their ops. and sales/marketing strategies - specifically their willingness to embrace compliance. I speak with lots of mortgage brokers (brand new, post-CFPB, 20 ...) and yet greater than 50% of my clients are failing to adapt to regulations, advancement in technology and Gen XYZ. Moreover, it is extremely important that you offer more than just a "Relationship Building" model. Additionally, focus on Demand Generation (https://www.youtube.com/watch?v=8gsDLWMlyUM)...another primer video - (https://www.youtube.com/watch?v=c9VllqAJc_I) - PLEASE do not go buying anything!

    IA - ialli@mortgagebankingadvisoryservices.com
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