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   ARTICLE   |   From Scotsman Guide Residential Edition   |   December 2012

The Return of the Mortgage Broker

Consider the past and the present to build for the future

At the height of the recession, it seemed to many within the housing industry that mortgage brokers had sung their last hurrah. Despite the valuable services that brokers provide, the recession certainly affected consumers’ perception of brokers, and suddenly, theirs was a job that wasn’t fondly revered, to say the least.

Today, however, the mortgage broker’s image — and business — has begun to rebound. According to a report conducted by National Mortgage News, third-party originations were $51.3 billion in fourth-quarter ’11, a sizable increase from the $29 billion originated in third-quarter ’11. Is this a sign that the mortgage broker is alive and well? Quite possibly, and as a matter of fact, it looks like brokers may even be flourishing again.

Regardless of this good news, the road going forward still may be a difficult one. How can mortgage brokers not only survive but thrive when competing against billion-dollar financial institutions? That may be a difficult question to answer, but undoubtedly the answer involves a careful look at the past, present and future of our business as a whole.

Looking back

To understand where brokers may go in the future, it’s important to first remember — and learn — from the past. And no matter how you look at it, the latest chapter in mortgage brokers’ lives begins with the subprime debacle and its effect on mortgage brokers’ overall image.

"Third-party originations were $51.3 billion in fourth-quarter ’11, a sizable increase from the $29 billion originated in third-quarter ’11."

To a large extent, it seemed as though mortgage brokers bore the brunt of the blame for offering certain products to customers now seen unworthy of being homeowners. Many in the general public still feel that it was mortgage brokers who were handing out loans to anyone and everyone who was willing to accept them.

For many within the mortgage industry, however, this blame seems unwarranted. By way of analogy, ask yourself: Are retailers at fault for offering cigarettes to their customers, knowing full well that cigarettes contain carcinogens? In the tobacco industry, the blame always has been pointed at the maker of the cigarette, so why isn’t this the case with subprime loans?

Regardless of exactly who’s at fault, when the housing bubble burst, many brokers were cast out of the business due to regulation and forced to absorb the brunt of the blame for the housing crisis, the institution of licensing and the inability to provide the same full array of products. Today, brokers must compete against direct-to-consumer companies, a fact that makes their resurgence all the more impressive.

Where we are now

Even with all of this noted, however, mortgage brokers shouldn’t feel sorry for themselves. After all, many brokers were courted by big banks and correspondent lenders to come and be part of their family. Surely, these institutions thought mortgage brokers would be committing occupational suicide if they tried to do business as usual. 

The best mortgage brokers, however, reorganized and reenergized their businesses, knowing that they still could be a viable option for consumers who want loans that are faster and cheaper than the ones they can get from large banks. Experienced brokers realize just how important it can be to have more flexibility and maneuverability in terms of products and loan types.

Even more, good brokers realize that being licensed truly means something to clients in this day and age. Licensing is something that good brokers can capitalize on and use to increase — and recapture — their market share. For those of us still working in the industry, licensing simply got rid of many individuals who shouldn’t have been brokering in the first place. 

In short, the big banks can keep their unlicensed originators. Licensing shouldn’t be considered a hindrance to success; it should be considered a badge of honor and a symbol of our professionalism. Third-party originators know that purchasing loans from a local, licensed source means something significant to a certain segment of the homebuying population. Consumers have become increasingly wary of dealing with big banks and the months that it can take to get a loan to the closing table. This and so many other reasons are why the mortgage broker is making a comeback.

Looking forward

With that in mind, can brokers relax now that they’re on the rebound? Absolutely not. There still are many within the industry who would like to see mortgage brokers’ demise, so third-party originators have to continue working hard to stay in business.

Numerous hurdles still may wait for brokers down the road. For instance, increased regulation from the Consumer Financial Protection Bureau, inefficiencies within the wholesale market and inevitable inflationary pressure from the latest round of quantitative easing represents a unique set of challenges for mortgage brokers to overcome in the future. Also, with the housing crisis has come a more litigious society, putting professional brokers at risk every time a loan is written.

Despite these challenges, however, the best mortgage brokers surely will persevere. In the end, successful brokers often care about their clients’ loans and financial well-being more than anyone else, and it’s this care that can produce quality results in terms of customer service. The brokers of tomorrow — and today — are licensed, local and ready to work, but more than anything, the brokers of tomorrow understand that their professionalism and passion will see them through these dark days to a long and prosperous career.


 


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