Launching a new company or even starting a new job can be an exciting and rewarding experience, but it can also be a frustrating and confusing one.
Originators of all stripes are paying attention to the upward trajectory of the broker channel. Those who have either become brokers for the first time in their careers or returned to mortgage brokering after spending years away from it have discovered plenty of struggles and successes in making the move.
Mortgage brokers’ market share of conventional conforming mortgages rose to 16% in 2019, according to CoreLogic TrueStandings. The reputation of loan quality coming from brokers dropped during and after the financial crisis, and the rise in foreclosure rates led some lenders to pull back from the broker channel. Since hitting a low of around seven percent in 2011, however, broker market share has gradually rebounded, and those loans are performing much better than the pre-crash loans.
Today, wholesale lenders and banks are making more products available to brokers. Isabel Williams became a mortgage broker in the spring of 2019, and she found the ability to offer more products to her clients was an immediate benefit to becoming a broker.
“Before I was only able to do what the company was comfortable with in the sense of conventional government and that was it,” Williams said.
As a broker, she’s been able to secure loans using a non-QM product for the first time, which she called an “eye-opener.” She says that these alternative options can help educated consumers who need a bit more assistance getting from point A to point B, and brokers can sometimes offer pathways to that bridge.
“Are they made for everybody? Absolutely not. But there are options available to people that want them to get from this point to the next, and once that happens, they're lifetime clients. So the ups for me are just having the access to more products for the consumer,” Williams said.
Mike Kortas had more than 20 years in the business before co-founding NEXA Mortgage with Matt Grella. He said that setting up any business is going to have its ups and downs, and for him, it mostly involved learning how to do call reports and all the other things that are required when you're not a loan officer. That learning never stops—but it does get easier.
“The first 90-120 days as a broker, I don't care how long you've done mortgages, it's a painful process,” Kortas said, adding that it can take new brokers at least four months to work through different lenders and learn which ones are a perfect fit for certain loans.
There are some similarities among brokers who have had an easy transition, including getting the benefit of knowledge from brokers who have been there, done that. Evan Einhorn started researching the transition just like most other research begins these days: online. He found the Brokers Rallying Against Whole-tail Lending (BRAWL) Facebook page, where he learned the questions he needed to ask in order to find out what he needed to know.
Without that expertise, Einhorn said, he would’ve taken a lot more time to get up and running, and his transition would’ve been more negative than positive.
“I would have probably failed. Or at least I wouldn't have been as compliant, or it would have taken me longer to grow my business. But it's so nice to have a community,” he said. “I adapted to the broker community quicker, knowing that I had a bunch of people that were part of BRAWL, and then I really had three local brokers that I could ask small questions of. That's very nice because some things are state specific, like forming an LLC. Very crucial.”
Learning how to create and run a successful business was the most difficult part of Einhorn’s transition, and Williams said that she wasn’t prepared specifically for the compliance aspect of running her own brokerage. She’s not alone; originators who have never had to deal with compliance issues before can be overwhelmed with the requirements, as well as with the steep penalties that go along with not being compliant.
“As a retail loan originator, I would just originate the loan and then I would hand it off to processing, they would do whatever they did, and magically give it back a month later, ta da! Now, owning my own brokerage, all of that responsibility from the beginning past the ‘ta-da’ is all me,” she said.
In order to ensure that she’s compliant as well as meeting the rising demand, Williams has had to hire more support staff than she’d planned.
“I just wish I would have been known a little bit more of what was expected because I was so used to just originating and there's a whole monster on the other side of that,” Williams said. “That was the downside, just not having the right expectations right in place.”
Kortas said that setting up with the right partners through AIME and finding other inroads to the broker community via online forums and groups make the transition easier. Hindsight is 2020, he said, but people within the broker community want to support newcomers as well as former brokers.
“There's this bond among brokers. If you're a broker, we're going to help you, doesn't matter what company you work for. When I was retail, that wasn't there,” he said. “If you were retail and I was retail, you're still my competitor, but in the broker world, there really is more of a bond.”