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Mortgage brokers are riding a rising tide

The  mortgage industry has generally struggled this year with the rise in rates, but the broker channel has been growing. Rick Bettencourt, president of the National Association of Mortgage Brokers, spoke with Scotsman Guide during NAMB’s national conference in Las Vegas last week about the outlook for the profession and the association’s priorities. Bettencourt is a branch manager for Mortgage Network in Danvers, Massachusetts.   

With the political change coming in Washington, what are some of the top legislative priorities for NAMB this year?

rbettOne of them is going to be [a revision to the] 3 percent points-and-fees cap. That’s always been a top issue for NAMB. It helps our small broker shops in more rural areas.

There’s been a lot of positive feedback from the CFPB [Consumer Financial Protection Bureau] in the new bureau about helping us get that fixed. We had a bill, HR 2570, that came out of the House Financial Services Committee, which was approved. As with every Congress toward the end of the year, bills die and we’re going to have to start up again. That’s the nature of the legislative swing.

We’re always looking at flood-insurance reform. That has just been postponed. Flood insurance for us is very important. The original Biggert-Waters Flood Reform Act came out, and it really messed things up for a lot of homeowners.

That’s important to us.

We are constantly looking at VA [Veterans Affairs]. There’s been a lot of discussion with VA IRRRLs [Interest Rate Reduction Refinance Loans] returning. I just had a meeting with Ginnie Mae a week or two ago discussing some abusive practices they’re seeing in the cash-out refinance world, not just IRRRLs.

You can’t do the IRRRLs anymore because the rates are so high. So what do the bad eggs do? They target veterans that want to do cash-out refinancing. So I had a meeting with Ginnie Mae on that and subsequent conversations with VA. There’s a lot of concerns legislatively that we’re always trying to stay on top of.

Of those, which do you think have the best chance of coming to fruition?

I can tell you there’s going to be a new rule from VA on cash-out refinancing. That’s going to happen pretty quick. They were mandated to get it done by the 30th of November and now they’re pretty close to figuring that out.

Points and fees: It’s interesting with the switch in the House Financial Services Committee, with the way the midterms went, I think we’re going to have a bit of a struggle in 2019. It’s difficult for me to categorize what will and won’t be a success.

With flood insurance, I definitely think you’ll see something come out. They just can’t not make a change. There has got to be something there, relief both for the homeowner and the federal government.

Mortgage lenders are struggling right now. How are the current marketing conditions affecting brokers?

Broker business is up. The independent mortgage broker shop has done very, very well this year. It’s funny, I won’t name the name, but I just spoke with a large lender who operates in multiple channels -- community-bank lending, correspondent and wholesale -- and there’s an expectation of a 12 to 15 percent growth in the wholesale-origination business in 2019.

A lot of lenders are expecting a large increase in the wholesale-origination business in 2019. I’m very excited to see our mortgage brokers do very well. A mortgage broker is perfectly designed for an interest rate rising environment anyways.

Why is that?

They have lower overhead. Their costs are down. So what drives costs up in rates is overhead. You’re a big bank, and you have all of this cost, and the costs [have to be] covered by something.

Brokers don’t do that. They don’t have the overhead costs that the lenders do. Because of that lack of overhead, they’re going to have lower rates consistently, especially in government [loans]. In VA, FHA [Federal Housing Administration], USDA [U.S. Department of Agriculture] I would challenge anyone to prove that a nondepository or depository lender could beat a mortgage broker on rate. Very few of them could. Maybe a large call center, a community bank that’s truly undercutting the market.

A broker with their systems and the technology that has been made available to them can close loans in as little as 15 days no problem, 16 days, 17 days. That’s fast. A lot of large nondepositories have difficulties with that. So, you’re looking at pricing, speed and execution and the lack of overhead keeps their rates low. They [brokers] will be very well positioned in 2019.

The Association of Independent Mortgage Experts [AIME] has been promoting an idea that the broker channel should strive to obtain 20 percent market share, up from an estimated 11 percent now. Do you think that’s an obtainable goal?

At one point in time, brokers captured nearly 70 percent of the market. So it’s always been a very, very real possibility that broker growth could exceed 16 percent. Could I say with a reasonable degree of certainty that it would hit 22 percent in a year? I don’t think anybody has a crystal ball who could say that.

I could say there will be broker growth, but you have the unforeseen, extenuating circumstances that could pop up, which can counter that instantaneously, such as a mid-term shift and a now Democratic-controlled House.

The mortgage broker-originator has a bullseye on their back. So if the political environment changes or the social economic things change, it could stagnate that broker growth a little bit.I personally think broker growth is definite, but to what degree, it’s difficult for anybody to say.

BRAWL (a group of independent brokers focused on wholesale-lender practices) has called for a broker-boycott of certain wholesale mortgage lenders that it alleges are, in essence, stealing their clients by referring them to their own retail channels instead of back to the broker when they do a refinance. Does NAMB have a position on that?

NAMB has always taken the high road in the discussion on that particular movement, which started about 15 months ago. We are not in the business of creating a delineation where we are saying, 'Don’t do business with these guys, do business with these guys.'

That’s not NAMB’s mandate. It’s never been that. We feel that creating this division is not good for the business. There are multiple manners in which companies operate themselves, both wholesale and retail and correspondent types of lending sources.

Me personally, I think all three [channels] will always be here in the United States because you’re going to have a consumer in the northwest corner of North Dakota, and there’s no mortgage broker in 150-mile radius. What is that person going to do? You’ve got to get financing to buy that house in the northwest corner of North Dakota, so you might go to a correspondent or you might go to a retail lender and that’s OK.

We have had high-level discussions with a lot of our wholesale partners about the behavior they’re referencing. Was there some practice where a broker closed a loan and a year later that lender solicited that person? Of course, there was.

I also don’t believe a client of mine is mine in perpetuity. I have to fight for the client. My job as a mortgage professional, as an adviser, is to reach out and stay in touch with that client on a regular basis. My job as an mortgage originator is to ensure that I’m servicing that person.

You’re in the business to make money. I’m in the business to make money. This entity is in the business to make money. You can’t say that Josh’s loan is that person’s loan forever. I don’t believe that.

Where I do have a problem is when a broker has a loan in the pipeline and that wholesale lender solicits at that time. That’s a problem for me. I have been assured by my wholesale partners that we talk to that that practice is not in the business.

Questions? Contact Jim Davis, editor of Scotsman Guide's Commercial Edition, at (800) 297-6061 or


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