Mortgage brokers took a lot of undeserved heat for the housing meltdown, but consumers need to know that using a broker is still one of the best ways to shop for a mortgage, according to the Washington Post’s real estate columnist.
“In the wake of the global financial crisis, a number of regulators and a number of congressmen really identified brokers as the bad guys in that whole equation,” Washington Post writer Kenneth Harney said. “...I remember sitting down with (former Massachusetts Rep.) Barney Frank on more than one occasion and him saying to me, ‘Community bankers -- good guys. Brokers -- bad guys.’ Yes, there were a number of brokers involved, but they’re not in the industry anymore as far as I can tell. ... Continuing to punish brokers for the perceived sins of the past is just unfair in my point of view.”
Speaking last weekend at the National Association of Mortgage Professionals (NAMB) national conference in Las Vegas, Harney said the much-maligned mortgage broker is still the best option for many borrowers searching for a loan.
“I have found as a consumer I get a lot more out of a good broker than I’m ever going to get out of a retail loan officer at a big bank,” he said. “The brokers I deal with are basically small businessmen. They survive on their reputation, on word of mouth. ... The broker model allows consumers to ‘shop’ without themselves having to shop.”
One issue facing brokers, according to Harney, is that most borrowers simply don’t know the difference between a broker and the loan officer at their local bank.
“There's no question that brokers bring a whole lot to the table. There's no question that the model is important,” Harney said. “But the responses I've gotten from recent columns make it clear to me that the borrowers out there really don't know how to find you. ... There's just a huge lack of understanding about brokers.
“What that says is that there's a huge need for branding here,” he said. “I think people, when they see the facts of your model, the facts of your business, really like it. It would be a whole lot better if people actually knew how to find brokers. ... Somehow, the word has to get out that brokers are different than bankers.
In addition to traditional advertising, Harney suggested that brokers harness the power of social media outlets such as Facebook and Twitter.
“My view is that brokers tend to be problem solvers, and here's a problem -- getting the word out: ‘Here's who we are,’” he said. “If you solve the branding problem, I think it will help to solve other problems.”
NAMB President Don Frommeyer said that the most important part of branding was defining the differences between brokers and mortgage bankers and loan officers.
“I think for the most part, most mortgage brokers are branding themselves,” Frommeyer told MPA. “The tough part about it is trying to differentiate between a broker and a banker, and the fact that they have different rules. … You and I both know that most times, the broker’s going to give a better deal than the bank. But it is a competitive market, and branding is very important.”
Frommeyer stressed that brokers should explain clearly exactly what they offer that a bank can’t. “As a broker, I’m licensed. I do continuing education – whereas a bank officer isn’t that way,” he said. “(Customers) might say, ‘Well, a bank can give me this, a bank can give me that.’ Well, I can give you service. They have one program; I have 23 different programs. You have to educate the consumer.”