Brokers are all stuck in their ‘little stupid agency box’, and customers are getting away
Walk into any mortgage conference, scroll through any rate sheet, or call up any one of thousands of independent lenders across the country, and you'll find roughly the same thing: the same products, the same agency guidelines, the same rates.
For independent mortgage brokers trying to build a sustainable business in that environment, the central challenge isn't just how to compete. It's how to stand out when standing out seems almost impossible.
Fintech companies have quietly moved in on lucrative adjacent markets like HELOCs, DSCR loans, and fix-and-flip financing. Meanwhile, most mortgage shops have stayed planted in the agency business they've always known.
Some experts believe that the number of loan officers nationwide could drop as low as 25,000. The brokers who survive, most observers agree, will be the ones who found a way to differentiate.
Bill Dallas (pictured top), chairman of Dallas Capital, has seen this kind of inflection point before in his four decades in the mortgage industry. He reminds brokers that if you’re selling rates, you’re selling the same thing as your competitors, no matter how many states you’re working in.
"They say, ‘I’m nationwide. I want to go into 50 states.’ Why?” Dallas told Mortgage Professional America. "Have you ever been to California? Have you ever been to Alaska? Have you ever tried to do a loan in Missouri? How you compete in a world of sameness is probably the issue. They all sell the same product to the same guys, and the consumer is going to come to 5,000 different lenders? We all have the same rates. It can't be that much different."
But Dallas also sees a clear path forward, and it’s one that starts with brokers recognizing and leaning into their single biggest structural advantage.
"If you're a broker and you're going to survive, you've got to deal with your image first of all,” Dallas said. “You then have got to have additional products and services. And then you can win, because you are the lowest-cost producer of the asset. Let's play to that strength."
Getting out of the agency box
The product gap, Dallas argues, is where brokers have the most ground to recover, and the most opportunity to gain. For years, mortgage companies ceded high-margin adjacent businesses to fintech players and specialty lenders while staying narrowly focused on agency production. He finds the pattern almost baffling, given the history.
"You've watched companies like SoFi and Figure, and all these guys take the value of these little niches and own them,” he said. “And here, mortgage people just stay in their little stupid agency box."
The lost ground is substantial and includes products like rehab transition lending, fix-and-flip, reverse mortgages, student loans, and personal loans. Dallas introduced a non-prime loan product in 1993 and, over the following two and a half years, moved his entire agency volume into non-agency lending.
The products now being positioned as the industry's cutting edge, like DSCR loans, bank statement loans, and HELOCs, are not new innovations. But they are products that are very popular with investors.
"These are high-margin nuggets, and they're very valuable,” Dallas said. “If you go to a structured finance conference in Vegas, there are four or five thousand investors all wanting a single-family loan."
The lesson from his own career, Dallas said, is that product diversification isn't just about revenue, it's about resilience when rate cycles turn.
"In '94, when interest rates suddenly went up six times, the spigot shut off, and I said, I'm not doing this again,” he said. “I've got to have products for cash out, products for first-time homebuyers, products for jumbo. I've got to have these things."
The borrower agencies can't serve
Alongside the product gap lies a guideline gap, and Dallas believes it represents one of the clearest differentiation opportunities available to brokers right now.
The underwriting framework governing most mortgage lending was designed for a world of W2 households, one job held for decades, one primary residence. That world is largely gone. Today's borrower has a day job, a side hustle, consulting income, a rental unit in the basement, and a gig economy income profile that the agencies were never built to evaluate.
"I can't count the rental income, I can't count the gig income, I can't count the consulting income,” Dallas said. “Salaries have gone from big bases to very small bases with large bonuses. I can't count those unless you've had it for two years. We are so backward."
The single-family home itself has also transformed. It’s also a home office, an accessory dwelling unit (ADU), and even a multi-generational housing solution generating rental income. Meanwhile, the guidelines have barely moved.
"The government built the entire infrastructure around the home you live in forever, with one job,” Dallas said. “The client doesn't look that way anymore. So you've got to modernize the guidelines, and you've got to have answers. If you don't have multiple products, you're going to try to jam people into agency loans, and that's going to get you in trouble."
Stay updated with the freshest mortgage news. Get exclusive interviews, breaking news, and industry events in your inbox, and always be the first to know by subscribing to our FREE daily newsletter.
