Mortgage brokers have made strides in regaining market share over the past few years. Still, the mortgage market has stalled recently with a rapid rise in interest rates and a decline in refinancing. Brokers can counter this slow-down by reconsidering home equity products, but technology will be the key to successful originations no matter the product.
Do you remember when brokers originated about 30% of all mortgages before the 2008 housing market crash? Soon after the crash, many brokers lost all of their business. During these difficult lending times, some suffered hits to their reputation while others were ashamed to call themselves mortgage brokers.
Before, brokers were mostly on their own, but today’s wholesale lenders can help them grow through technology, education and support.
Fast forward to today and independent mortgage brokers have regained a significant share of the market — more than 20%. What has changed and, more importantly, what do brokers expect from their wholesale lender partners?
One thing that’s for sure is that mortgage brokers want to grow their businesses and they want to do it with a partner that’s going to support them. Before, brokers were mostly on their own, but today’s wholesale lenders can help them grow through technology, education and support.
For anyone who has been in the mortgage industry at least 20 years, there was a time when you had to use a fax machine to send borrower documents to a lender for underwriting purposes. Brokers and borrowers also had to fill out an application with pen and paper.
Now, thanks to innovative tools developed by fintech companies, mortgage brokers can take online applications from anywhere. But that’s not all. With a powerful tech-enabled ecosystem, brokers also can submit applications directly to a lender’s loan origination system. This helps brokers to see mortgage approval results in real time. By breaking the barriers between the borrower and broker, everyone can focus on getting a mortgage in an efficient and transparent way.
Today, mortgage brokers no longer need to focus on mundane tasks. Mortgage point-of-sale solutions and easy-to-use third-party originator platforms help automate things like verification of income, identity, addresses, phone numbers and so on. The upside to this is that when technology is used correctly, it gives mortgage brokers an edge, allowing their borrowers to see them as modern and up to date. After all, serving the borrower is the highest priority.
Everyone wins in this situation. Technology helps wholesale lenders onboard brokers faster. Brokers can use technology to service their borrowers and, in return, grow their businesses. And borrowers can apply online and see the status of their application all in one place.
In the past few months, companies like Rocket Mortgage and LoanDepot have announced the launch of new technologies to originate home equity loans and home equity lines of credit (HELOCs). A home equity loan is a second mortgage with a fixed interest rate and monthly payment. HELOCs are a line of credit with a variable interest rate that can be used as needed by the homeowner.
Due to decreasing demand for refinances, originators must seek other opportunities to gain market share. Home equity loan products are booming because of the amount of equity that borrowers have in their homes. Homeowners had a record $11.5 trillion in tappable equity as of second-quarter 2022, according to mortgage data provider Black Knight. In order to handle the expected surge in volume, lenders will need to implement the right home equity technology.
Although some brokers may look at home equity loan products as less favorable, it does not mean that they won’t want a piece of the pie. Today, the origination process for HELOCs and home equity loans is not yet robust enough to handle a high volume at one time. But with the right software, you can cut the origination costs, making this kind of product more attractive for brokers to process.
Expect new brokers to enter the mortgage industry to service this huge HELOC wave. Wholesale lenders will want to equip their independent broker partners with the right technology to handle all of their products, including home equity lending options.
Mortgage brokers who select a couple of wholesale lenders to do business with are not going to know all the ins and outs of each loan product. This is why it’s essential for wholesale lenders to educate their broker partners on the loans they provide.
Mortgage brokers will be selling the wholesale lender’s products, so they need to be armed with all of the right information. They will need to have a deep understanding of each loan product so they can match products with the people they serve. Also, brokers need to be armed with knowledge about the wholesale lender’s underwriting process. They should completely understand what to expect during this process to avoid delays and disappointment for their clients.
If brokers are using a wholesale lender’s technology, then they need to be trained on how to use it properly. Aside from learning the basics, they’ll need to be able to analyze loan files and understand when a file is ready for submission.
Remember that mortgage brokers are becoming savvier with technology. Some items that are important to lenders also will be important to brokers. Wholesale lenders will want to make sure that their third-party originator platforms include best-in-class integrations along with end-to-end functionality and scalability. Cloud-based platforms with easy-to-use workflows are a must.
Not all borrowers have the same financial profile, so brokers need to guide and educate them on loans that are geared to each profile. Brokers need to know how to calculate the borrower’s net worth and be able to explain things like how much home the client can afford. Financial literacy is about being able to discuss credit scores, downpayments, loan terms, etc. A broker who is well prepared to explain these things to borrowers will be able to help people in a more meaningful way.
Small brokerages may be good at bringing in loans, but when it comes to hiring more originators, they don’t necessarily have the time or resources to properly train their sales staff. Wholesale lenders can step in to provide ongoing sales training that helps their broker partners.
Brokers are concerned that wholesale lenders will start marketing to clients that they worked so hard to bring in. Brokers also are cautious about sharing Realtor information because they don’t want the wholesale lender’s internal staff to start approaching their referral partners for business.
For example, mortgage lenders that have both a direct-to-consumer and a wholesale channel need to ensure that they first build trust with their broker partners and be transparent in the relationship. At the end of the day, brokers want a partner dedicated to the broker channel, not one soliciting their clients.
Wholesale lenders must find ways to connect with brokers to help build their brand and reputation. To successfully build broker relationships, consider podcasts or industry trade associations. For example, the well-known “Broker to Broker” podcast through the Association of Independent Mortgage Experts (AIME) gives both wholesale lenders and brokers an opportunity to build a community and connect.
There are industry-specific organizations through which mortgage professionals can attend networking events. The National Association of Mortgage Brokers (NAMB) helps its members to connect with peers. Mortgage brokers also get access to education and certification programs. Other benefits of the NAMB membership include legislative representation and advocacy.
AIME focuses on building a community for brokers, loan officers and others who are starting out in the mortgage business. Benefits of the AIME membership include virtual resources, compliance assistance, vendor and lender partnerships, and networking and legislative support.
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Whether new or established, wholesale lenders must consider how they’re going to help their mortgage brokers grow. Do they have a vision for how they can deliver best-in-class technology, education and support? Brokers will only work with partners that can help them achieve their own business objectives. ●
Veronica Nguyen is the co-founder of BeSmartee, which created one of the first mortgage point-of-sale platforms to automate the mortgage process and streamline the consumer experience. Nguyen is passionate about building technology that helps improve the mortgage origination process and industry as a whole. Nguyen believes everyone should have equal opportunity to shop for a home in a seamless and transparent way. She won the 2020 HousingWire Women of Influence and the 2021 Mortgage Star by Mortgage Women Magazine awards.
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