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Brokers interested in banking also should know that purchasing delays can be caused by investors themselves, who may or may not require a full review of each loan submitted for purchase. With that in mind, when seeking investors, inquiring about normal turn times is crucial. Being familiar with these time frames will help you devise either a final condition list or an as-is purchase agreement, which will allow you to include shipping times and review times when developing purchases’ locking policies. Again, limiting a deal’s time on the warehouse line ultimately will limit costs taken out of the SRP.
Regardless of a bank’s locking policies, breaking locks still may be inevitable, so prospective bankers should know how to handle these situations. In short, the most cost-effective strategy to take is simply to break a lock as soon as you must. If you take the route of letting a locked-in rate expire because you want to do business with another investor, you may end up being offered worse pricing or higher costs.
All things considered, hefty SRPs may no longer look so alluring to brokers when they factor in all of the costs associated with operating a mortgage bank. Of course, mortgage banking can be a highly profitable business, but the cost of running any prospective business must be adequately accounted for.
Finally, in making the transition to banking, mortgage brokers should familiarize themselves with warehouse lines and third-party originations (TPOs), aspects of the business that may require different pricing models.
When selecting warehouse lines, new bankers should be sure that their lines allow them to do TPO business and participate in other programs that investors may offer. Otherwise, you won’t be able to sell your loans. New bankers also should carefully investigate a warehouse’s haircut fees and, in addition, should ascertain whether or not investors will charge delivery fees.
Bankers who partake in TPO lending must exercise care in choosing the brokers with whom they do business. For instance, it’s important that any involved broker has enough liquidity to be able to handle issues if a loan is requested for re-purchase. Along the same lines, a prospective banker needs to make sure that broker agreements are built to ensure the protection of the bank itself and the company as a whole. In this way, it can be helpful to have an employee who verifies that every external broker is licensed and up-to-date with the Nationwide Mortgage Licensing System & Registry (NMLS).
Compliance is one of the most important aspects of being a mortgage banker. Having an employee monitor local, federal and state regulations can mean the difference between being in business for a few years and being in business for 30 years. From keeping in check with the Home Mortgage Disclosure Act to making sure that loan officers are licensed and certified, the necessity of proper compliance can’t be overstated. Adequately preparing in this regard will be vital to the success of your new organization.
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Pursuing a career as a mortgage broker certainly offers its own variety of rewards — and financial incentives — but for some, these rewards can increase by entering the world of mortgage banking.
That move must be made with care and caution, however. Thoroughly educating yourself about mortgage banking operations can help you put the necessary pieces in place, and design solid policies, systems and management that will keep your company as healthy and profitable as possible.
Darrin Stobaugh is a senior manager for Argus Lending in Pleasant Hill, Calif., where he also writes the company’s blog.
A 26-year veteran of the mortgage industry, Stobaugh is also the owner of DES Financial Services in San Jose, Calif. He has held positions as a regional operations manager and corporate-underwriting manager at some of the top wholesale institutions in the industry. Reach him at email@example.com.
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