Competition in the mortgage business has cranked up several notches in the past several months, between the wholesale channel and the retail channel; between independent mortgage brokers and mortgage bankers.
From my position as the leader of the industry’s most proactive and supportive advocacy group for mortgage brokers, Association of Independent Mortgage Experts (AIME); it’s exciting to see mortgage brokers continue to grow a louder voice and make massive gains — both in consumer awareness and market share. There is also a heightened sense of pride and camaraderie that exists amongst mortgage brokers, as the channel is no longer shyly working from the shadows, but rather, it is loudly beating its chest and shouting so that the entire country understands why it’s making a major comeback.
Battle lines between mortgage brokers and mortgage bankers have been clearly drawn, and while I undoubtedly have something to do with that, there’s a big misconception that I want to clear up, in terms of my intentions with AIME messaging.
For the record, I have nothing against retail loan originators. As people, and as professionals, retail loan originators are the exact same as mortgage brokers — they are people working hard to succeed at an important job, providing great service to their clients, in the hopes of building a great career for themselves and providing for their families. We’re all human.
When I speak out against the retail channel, my intention is just that — to attack the retail business model. I strongly believe the independent mortgage channel is more than the best option for consumers — it’s the best option for loan originators, as well. I think the retail mortgage banking model is broken and quickly fading, as giant banks and retail lenders concern themselves more with profit margin than with client service.
In order to achieve their desired profit margins, and to offset the hefty price tags associated with overhead and advertising costs, giant banks and retail lenders are increasing their margins in a major way — and it’s negatively impacting the earning potential of all those hard-working mortgage bankers. Sure, many retail loan originators do very well — but they’d perform even better as independent mortgage brokers.
Right now, the heat has really been turned up on retail mortgage lenders because of market contraction and the rapid growth of the mortgage broker channel — more pressure than at any point in the last decade — which has led to retail loan originators producing lower loan volume. To offset those shortcomings, these retail lenders increase their margins to cover their fixed cost, which ultimately widens the disparity between the interest rates that consumers can get from brokers vs. bankers.
While that’s a big positive for mortgage brokers and a negative for retail loan originators, I’m not celebrating — because it’s not necessarily good for consumers, either. At the end of the day, consumers deserve the very best rates. It’s not retail loan originators’ fault that they can’t provide the best rates, it’s the fault of the giant companies they work for.
Right now, the mortgage broker channel is stronger than ever, fulfillment is the best in the industry, pricing is as competitive as possible, and now, with the launch of ARIVE, technology is also an advantage for mortgage brokers.
Of course, everyone has the right to do whatever they want. Some people are more comfortable with the sense of stability that comes from working for a giant bank, while others aspire for the sense of freedom, control and access that comes from working at — or owning — an independent mortgage brokerage.
There’s nothing wrong with either decision. At the end of the day, the obligation is to act in the best interest of consumers and, in my mind, that’s a lot easier as an independent mortgage broker.
