Residential Magazine

Play the Long Game When Choosing a Lender

Growth-minded brokers should keep client retention in mind with any deal

By Phil Shoemaker

When it comes to business partnerships, actions speak louder than words. In the wholesale mortgage industry, this concept is put to the test and demonstrated daily as it pertains to wholesale lenders helping their mortgage broker partners manage their loan pipelines in a way that enables them to maintain a long-term, sustainable business.

To put it simply, a mortgage broker’s ability to truly grow their business over the long term is largely dependent on which wholesale lender they send loans to. Specifically, what does the lender do with the loan after the deal closes?

The wholesale lender may retain servicing for the life of the loan, or it may sell the servicing rights to an unknown company that the borrower hasn’t heard of and didn’t request. This decision goes a long way to determine your ceiling, so to speak, as it pertains to sustaining maximum earning potential over the span of years — not just in the months of record-low interest rates.

Costly oversight

The reality is that many of the top 20 wholesale lenders in the U.S. sell off servicing rights to all of their loans, often within two years, and well before many homeowners refinance their mortgages. Because this is such a widely adopted process, wholesale lending has increasingly become little more than a transactional affiliation between the lenders and their broker partners — and it hurts brokers the most in the long run.

This transactional nature within the wholesale industry has essentially created two separate silos within the mortgage business — originations and servicing — when they should be treated as the same. This breakdown is quite apparent in low-rate environments like 2020, as many mortgage originators operate with a sense of tunnel vision. 

They are so focused on getting as many new clients through the door as possible, but they’re not always taking the time to think about which wholesale lender they are sending these loans to. It’s an oversight that could result in the broker leaving a lot of money on the table months or years down the line if the servicing rights are sold off into oblivion. 

This warp-speed mentality can be fun, no doubt, and the adrenaline rush from closing so many loans is quite real. But for so many mortgage brokers — who value the long-term growth and sustainability of their business — there is a real chance that they are standing still instead of moving forward.

Growth potential

A broker who enjoys a really fast loan origination process with a lender that, in turn, sells away the servicing rights to the loan, is similar to a marathon runner who sets a world record for the fastest opening mile of the race but then suddenly drops out when there are still 25 miles left to run. It was exciting and impressive at first, but it’s mostly confusing because nothing comes of it in the long run. 

This is because originating a loan is only the first part of the game. The majority of the game still needs to be played, namely the servicing of the loan. And these later elements are what genuinely determines a broker’s real long-term growth. When it comes to brokers growing their business, the lender that services the loan and how positively the borrower interacts with them is just as important — if not more important — than how quickly the initial lender was able to originate the loan. 

It is easier for retail competitors to swoop in and win over a mortgage broker’s past clients for refinance opportunities when the loan is sold off to a new servicer. This means that, for every new client a broker lands, they might be losing one or more clients that they worked with months or years ago. 

Brokers must view their homebuyer clients in terms of a relationship, not a transaction, and take the steps necessary to make them a client for life.

Continuing relationship

For mortgage brokers to beat their competition and retain the clients that they worked so hard to win over initially, they need to place a heavier emphasis on the servicing of their loans. Brokers must view their homebuyer clients in terms of a relationship, not a transaction, and take the steps necessary to make them a client for life. 

This starts with the origination process — communicating well, providing sound advice and shopping on the client’s behalf to find the best deal. This level of service, however, should continue throughout the loan servicing. 

Brokers can best achieve the balance of prioritizing the entire loan cycle by thinking two or three steps ahead. They should aim to connect their client with a wholesale lender that provides competitive pricing but also retains servicing of the loan. This approach keeps mortgage brokers, borrowers and servicers interconnected for the life of the loan, making it easier for brokers to stay in front of their clients and retain their business in future refinance or purchase opportunities. 

The enhanced consistency and experience, from the client perspective, will ultimately lead mortgage brokers to boost their retention rates. In turn, they will achieve the long-term, sustainable business growth they are seeking. ●


  • Phil Shoemaker

    Phil Shoemaker is president of originations at Home Point Financial, one of the nation’s leading mortgage originators and servicers. Shoemaker joined Home Point in 2018 and has played a lead role in the company’s two-year growth from $11.6 billion to nearly $60 billion in loan volume, a span in which Home Point has emerged as one of the nation’s fastest-growing mortgage lenders.

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