Have We Kicked Mortgage Brokers to the Curb Too Soon? Why Mortgage Brokers Will Survive

By
Mortgage and Lending with Guild Mortgage NMLS #238304

Today I got an e-mail asking me this:  Are mortgage brokers going to survive this economic meltdown?

My answer is YES, and it comes from my experience as an AUTO BROKER.

Over the last 25 years , franchised auto dealerships here in California have done everything in their power to get rid of auto brokers.

Because dealers held all the power (money along with an organized lobby) and auto brokers were small, independent business people, guess who got the most attention from the lawmakers in Sacramento?

Politician thinking: "Money from the big guys? Or protect consumer choices?" Hmmmmm...what should any self respecting politician do?

Since the "real" agenda of the dealers was to put auto brokers at a disadvantage, they had to prove this point to lawmakers: auto brokers are scumbags who do not deserve to sell cars to the public. 

So every car deal gone bad was blamed on the fact an auto broker was involved. Every little thing wrong with the car was because it wasn't delivered at the dealership. The media chimed in...because that's what media does.

And then the inevitable: "Broker laws" were enacted. Stupid, idiotic rules that made it harder for people to do business with auto brokers.

After all, the public needed to be "protected" from auto brokers. And you know how "protection" comes with another layer of cost. (think HVCC).

In spite of everything, consumers continued to LIKE buying and leasing cars without setting foot in the dealership.

Or should I re-phrase this? People continued to HATE buying cars from dealers, and saw brokers as a great alternative.

Surprise! Auto brokers continued to thrive, even though laws and regulations rained down from Sacramento.

My position was always this: If there was not a market for auto brokers, there would not BE any auto brokers.  Never underestimate the sheer power of pure market demand for a product or a service. Even laws can't kill it.

WHY MORTGAGE BROKERS WILL NOT BECOME EXTINCT

When a dealership would say this to me "We don't do business with brokers", I used to say this: "Too bad, because you don't know any other lady that buys 10 cars a month." Yep, nine times out of ten that single sentence was just too tempting and I got the car I wanted.

MORTGAGE BROKERS have been blamed, battered, bruised, and kicked to the curb by the very banks that used to woo them. The real estate industry has all but written mortgage brokers off. Banks, with all of their taxpayer money, must feel pretty smug about the fact mortgage brokers have been all but driven out of business.

But are we writing off mortgage brokers too soon? What about this?

  1. In spite of everything, people continue to LIKE getting a mortgage without having to step foot in a bank. They complain about the impersonal service of banks, the fact banks are closed on weekends, and don't answer their phones on the weekdays, anyway.
  2. The line between a bank saying  "We don't do business with brokers" and "we need brokers to bring us more loans" is very, very fine.

So fine, in fact, that I believe it could be easily broken. Here's why: 

  1. Banks could not assemble a workforce that is more skilled than the legions of mortgage brokers left in the business.
  2. Those same mortgage brokers are sitting on databases FAT with great clients who are loyal to the BROKER, not to the BANK who holds their loan.
  3. One little uptick in the real estate market is going to leave most of the big banks hopelessly understaffed when it comes to mortgage people.

 

Written by Janet Guilbault, Mortgage Banker/Broker based out of the San Francisco Bay Area

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Re-Blogged 2 times:

Re-Blogged By Re-Blogged At
  1. Steve Facella 07/29/2009 06:42 AM
  2. Dana Devine 07/30/2009 12:33 AM
Topic:
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Tags:
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Rainmaker
183,180
Janet Guilbault
Guild Mortgage - Walnut Creek, CA
San Francisco Bay Area Direct Mortgage Lender

Janet: How well stated! I could not agree more.

When an option arm was first explained to me I said this "Wait. Why would anyone do that loan? And how can the average Joe even understand this loan?"

I only did a few, to flipper investors that insisted on it.

2/28...did only one and came to regret it. Very nice client now stuck in that loan. There was no FHA here in California, then.

Your last paragraph rings true. As brokers, we may never be able to fight off the banks. But we could police our own, and have a much stronger organization. Communities like ActiveRain will hopeful help us go in the right direction.

 

Jul 29, 2009 03:52 AM #34
Rainmaker
1,807,825
Michael J. Perry
KW Elite - Lancaster, PA
Lancaster, PA Relo Specialist

It's true that most people do not have a good taste in their mouth about banks !!!

Jul 29, 2009 04:12 AM #35
Rainmaker
183,180
Janet Guilbault
Guild Mortgage - Walnut Creek, CA
San Francisco Bay Area Direct Mortgage Lender

Michael: Me included... 

That should help brokers. It has helped my business.

Jul 29, 2009 04:17 AM #36
Rainmaker
1,431,110
Gene Riemenschneider
Home Point Real Estate - Brentwood, CA
Turning Houses into Homes

I think the mortgage brokers will be back.  Small lenders, brokers, and banks are the cornerstone of creative lending and customer service.  The big banks are in control now and it is a mess.

Jul 29, 2009 06:33 AM #37
Rainer
5,405
Leissa Gebert
Northwest Mortgage Group - Portland, OR

It is refreshing to read all the comments here.  While those of us in the industry understand the value of a good broker and can see how the Banks are throwing us under the bus; what is the perception of the consumer.  While "Banks" have lost some of their favor with all the Stimulus bail out, etc., the uneducated consumer may still have this "perception" of trust in their bank.  They certainly don't see, nor understand how the banks are trying to eliminate brokers as competition - that very same "competition" that they were courting not too long ago with their offerings of the unsavory loan products that contributed to the problems of the past couple years.  Educating the consumer on reality has never been more important.

Jul 29, 2009 06:56 AM #38
Rainer
63,256
Mark Warner
RealEspace - Plano, TX

Janet,

That was right on target. We need the broker channel for consumers so they have more choices. Choices provide for competition and competition is good.

thanks,

Jul 29, 2009 07:19 AM #39
Rainer
37,832
Andrew McGrath
Donovan Group Realty - Santa Ana, CA

Janet,
I think you have some great insight due to your experience as an auto broker. Your comment:  "the list of broker laws was long, so let me give you one example. Auto brokers used to be able to register new cars directly with the Dept. of Motor Vehicles. Broker laws made this illegal, and new car registrations had to be done ONLY by the dealership." really hit home.

I posted recently about how HVCC's intent is to remove mortgage brokers from the business and not appraisers. Appraisers are simply the device that the banks are using to 'turn the screws' on the mortgage brokers. Restate your comment above as follows and see how true it is today:

"Mortgage Brokers used to be able to order appraisals directly from the appraiser. HVCC laws made this illegal and now appraisals have to be ordered ONLY by the bank"

Makes me wonder if the banks went looking around in other industries in which the big players were forced to be more competitive by brokers and they 'borrowed' some ideas.

-Andrew

Jul 29, 2009 07:22 AM #40
Rainmaker
183,180
Janet Guilbault
Guild Mortgage - Walnut Creek, CA
San Francisco Bay Area Direct Mortgage Lender

Andrew: What insight! Thank you for pointing that out. The essence of this post was exactly that: brokers are not dying out because consumers PREFER banks.  They are being forced out of business.

Could I please get a link to your post? I could not agree with you more. HVCC is meant to place mortgage brokers at a disadvantage! While we are all shaking our heads wondering how HVCC came around (because it hurts borrowers far more than it helps them)...the reason it doesn't make sense is because the real intent  of HVCC is a hidden agenda.

Jul 29, 2009 07:36 AM #41
Rainmaker
183,180
Janet Guilbault
Guild Mortgage - Walnut Creek, CA
San Francisco Bay Area Direct Mortgage Lender

Mark: Choices help everyone and competition keeps prices low. I agree that businesses that are not competitive, or do not provide what the market wants, will go out of business anyway.

Jul 29, 2009 07:37 AM #42
Rainmaker
183,180
Janet Guilbault
Guild Mortgage - Walnut Creek, CA
San Francisco Bay Area Direct Mortgage Lender

Leissa: Great points. However the banks are shooting themselves in the foot right now. Consumers may "trust" banks, but they are not going to stand for the lousy service that banks are dishing out right now. So they are turning to brokers. So are real estate agents. How ironic is that?

 

Jul 29, 2009 07:45 AM #43
Rainmaker
183,180
Janet Guilbault
Guild Mortgage - Walnut Creek, CA
San Francisco Bay Area Direct Mortgage Lender

Gene:

Glad you agree with me. I like your term creative lending. Because these days, that is a huge advantage and the big banks are more into cookie cutter lending.

Jul 29, 2009 07:49 AM #44
Anonymous
Danell Merren

Janet, you always have wonderful insights!

Jul 29, 2009 10:54 AM #45
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Missy Caulk
Missy Caulk TEAM - Ann Arbor, MI
Savvy Realtor - Ann Arbor Real Estate

I hope so, Janet.

We just had two mortage brokers in Ann Arbor merge today.

The reason was so they could compete with the banks.

Interesting. ..

Jul 29, 2009 12:12 PM #46
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653,798
Paul McFadden
Paratex - Seattle, WA
Pest Control, Seattle, WA.

Janet: You are probably right although, ultimately, the banks hold all the cards. If they choose not to be in wholesale lending, a broker won't survive. Obviously bank rates are higher but that's the game right now. I do agree with you in that I think most of the carnage is done. Plus, an interesting phenomenon is going on. Every one is lining up their warehouse lines and moving toward in-house underwriting if they can. It allows for more control and makes sure the banks (investors) will purchase the loan in most cases.

Jul 29, 2009 01:13 PM #47
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163,730
Monica Bourgeau
New Phase Business Coaching - Portland, OR
Business Coaching

Excellent points, it does seem to be getting more difficult for our mortgage brokers, we are seeing significant delays and lenders that are non-responsive to the broker and our client.

Jul 29, 2009 02:32 PM #48
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Christine Donovan
Donovan Blatt Realty - Costa Mesa, CA
Broker/Attorney 714-319-9751 DRE01267479 - Costa M

It seems to me it's similar to the builders who didn't want to work with real estate brokers during the boom or are now enticing begging us to bring our buyers.

Mortgage brokers know their business and, as you point out, have a loyal following who know how good they have it with their brokers.

Jul 29, 2009 04:33 PM #49
Rainmaker
1,486,170
Lyn Sims
RE/MAX Suburban - Schaumburg, IL
Schaumburg IL Real Estate

I'm not so sure comparing car brokers and mortage brokers gives me a warm fuzzy feeling.  Bankers are order takers only and are totally inflexible with loan knowledge and their time. They can't shop a loan for a consumer.

Jul 30, 2009 12:45 PM #50
Rainmaker
174,893
Kate Kate
San Diego, CA

I'm coming in late here but this is TOO good to pass by.  Thank you so much for taking the time to spell out the truth. Americans want to do business with a person and they worship loyalty. Yes, they do! Kate Ford

Jul 31, 2009 05:01 AM #51
Anonymous
Darren Brennan

Greetings Janet.

 

I once owned a small mortgage broker shop. Must tell you, since then I join a Federal Charter, and I swear, its like 2004-5-6 again. 24 hour turn time for 4506T, Appraisals, within 5 days, start to finish, and U/W FHA, USDA,VA in 72 hours or less. While I agree with you, there is a place for mortgage brokers, you have to ask yourself, at some point, is there a better way. I do miss the relationships, with the lenders, but here in MA, it was very obvious to me, that the writing was on the wall. The sad truth is, I can out perform a mortgage broker everyday, from pricing, product, turn time, and better service. I wish every mortgage broker who is trying, buttttttttttttttttt, at some point, I needed to make a living again. I wish everyone the very best!

Darren

Apr 03, 2010 07:22 AM #52
Anonymous
John O'neil

Mortgage brokers are good? Since when. Mortgage brokers hired idiots to go out and sell loans, not caring about the consumer. Maybe the broker was good, but the extension of the broker, destroyed everything that is today. Lenders have better products and pricing, while their service may seem slow to you, you don't hear lenders getting written up everyday for violations now, do you. 

 

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Brian: I am under the wing of a great correspondent lender, but it is painful to watch what has happened to the broker side of the business.

I brokered out a round of refi's to Bank W...they had a killer rate at the time, and some of my mortgage clients ASKED to do business with Bank W.

The service I got from that bank was so horrible, the people working for the bank were SO incompetent, the waiting time for every little thing was SO long, that I wondered why they even kept their broker business alive.

I also wondered why in the WORLD anyone would prefer to go straight to that bank themselves and be tortured by their short comings.

PS And in the end, the rates were no bargain due to numerous lock extensions needed to cover all the time consuming mistakes the bank made along the way.

It's disgusting.

Janet, maybe you need to learn how to work with a lender, rather than being a broker. Your right, some banks kill time with mistakes, and this will cost you YSP. My question to you is? If you knew better, then why did you not pull the loans, and go elsewhere? A fair question. Every good!!!!!!!!! broker calls their files into two bank 100% of the time, regardless of fallout, so when things happen, as you explained, the good!!!!! broker has choices. Sounds to me, inexperience lost you money,time and customer satisfaction. 

 

Apr 05, 2010 07:01 AM #53
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Janet Guilbault

San Francisco Bay Area Direct Mortgage Lender
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