Are mortgage brokers a dying breed?

by 19 Mar 2015
By Todd Bryant, president and founder of Bryant Surety Bonds

The housing market is picking up, slowly but surely, and so is construction spending and commercial and homebuilding. But what about mortgage brokerage?
 
It’s true that many brokers had to go out of business during the recession. While painful, the process was also a cleansing one for the industry.
 
Many were quick to pronounce mortgage brokers a dying breed. Yet reality disproves them today.
 
Brokers are ever more instrumental to the housing market because they fill an important gap between the consumer and the right lending institution. They shop around multiple lenders to find the best rates for their customers; they negotiate and coordinate with appraisers, insurers and realtors, saving time and money of the buyer. Without this middleman, many buildings would simply stay empty, and many people - without homes, which is definitely not what the U.S. economy needs.
 
So how have mortgage brokerages been doing after the economic and financial crisis? Let’s delve into some specifics.
 
What the numbers show
 
$34 billion in new home loans were originated by mortgage brokers in the last quarter of 2014. That is a 6.3% increase from the third quarter. Growth of business volume seems slow but steady.
 
Depending on their years of experience in the field, mortgage brokers earn between $60,000 and $90,000 per year currently. In comparison with similar careers in financial institutions, brokers are at the upper part of the average income scale, as bank loan officers would earn between $40,000 and 65,000 annually.
 
Back in 2005, the average salary of a mortgage broker was $103,507. The difference is apparent, yet the current trend shows a gradual improvement, which comes hand in hand with the overall economic stabilization. As more buyers are able to afford new homes, brokers can close more deals and thus earn even more.  
 
The National Association of Mortgage Brokers had about 25,000 members in 2006. In the beginning of 2013, there were only 5,000. This drastic decrease is attributed to the real estate downturn.
 
While many brokers were driven out of business during that time, it also meant that many people who were not truly dedicated to the trade, or were looking for quick ways to boost their income, chose to follow a different path. As the economy recovers, there’s now more room in the industry for truly dedicated mortgage brokers.
 
The ups and downs
 
While the outlook is more positive, it’s still not easy to operate a small brokerage these days. There are many important details to take care of, such as insurance, getting licensed and bonded, and there are plenty of challenges too. Yet persevering in the profession, with good motivation and high moral standards, does pay off.
 
Yes, it’s difficult to start with a proper office space, but customers are ever more demanding because they need to feel secure and able to trust the broker, especially after the crisis. That’s why even sole mortgage brokers need to have an office, which works for their credibility.
 
It’s also not easy to follow up with all the new rules that regulate the financial environment. Breaking them is costly, and so is having a compliance officer who ensures you’re on the right side of the law.
 
Dealing with financial institutions is tough love too. Banks might lock loans, stop wholesaling loans or just drop brokers. Only strong adaptability and good relations with multiple lenders can help brokers in such moments.
 
Despite all the challenges, dedicated and driven mortgage brokers are bound to have better conditions and stronger business. While having a brokerage is not for the weak-hearted, with enough diligence and flexibility, good brokers can and will make a good living.
 
How do you see the future of mortgage brokers? We’d love to hear from you in the comments below.
 
Todd Bryant is the president and founder of Bryant Surety Bonds. He is a surety bonds expert with years of experience in helping mortgage brokers get bonded and start their business.
 

COMMENTS

  • by Cheryl M | 3/19/2015 10:07:57 AM

    Of course they are, doesn't that speak for itself...?

  • by Joe Prevost pioneer-funding.com | 3/19/2015 2:40:50 PM

    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.

  • by Aaron VanTrojen / Geneva Financial, LLC. | 3/21/2015 12:29:04 PM

    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.

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