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?
- 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.
- 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:
- Banks could not assemble a workforce that is more skilled than the legions of mortgage brokers left in the business.
- 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.
- 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