Borker or bank – each option has its advantages and disadvantages
I have read your series regarding entering the industry with interest as I am interviewing with a couple of companies. I have been in the financial services industry for ten years – including working for a bank and an insurance company. My question is: what type of company should I be looking for? I have interviewed with a broker and a bank.
--Jennifer from Connecticut
First, thanks for reading my column. You pose an interesting question. There are certainly a wide range of company types within this industry. You mentioned the first classification – broker vs. bank. Though more specifically, there are brokers, independent residential lenders and those that are either subsidiaries or divisions of banking institutions. There are advantages and disadvantages of each. For example, brokers can send loans to a wide range of lenders and because of this can accommodate a very wide range of prospective borrowers. On the other hand, because brokers can't underwrite or fund loans, they have less control over the entire process.
Banks may have access to certain products which are unique to the institution. For example, a special program for low-to-moderate income borrowers or a program for doctors on the other end of the financial spectrum. You also will not need to be licensed if you go with a federally chartered bank. On the other side of the coin, you may be restricted to only the bank's products and underwriting guidelines.
Independent lenders control the process because they can underwrite and fund, but also can use a variety of investors, thus can provide a wider range of products and qualification alternatives. It should be noted that some subsidiaries of banks act more like independent lenders as they can sell loans to a wide range of investors but still may have access to bank-specific products.
--Dave Hershman
Dave Hershman has been the leading author and a top speaker for the industry for decades with six books authored and hundreds of articles published. His website is www.originationpro.com. If you have a reaction to this commentary or another question you would like answered in this column? Email Dave directly at [email protected].
--Jennifer from Connecticut
First, thanks for reading my column. You pose an interesting question. There are certainly a wide range of company types within this industry. You mentioned the first classification – broker vs. bank. Though more specifically, there are brokers, independent residential lenders and those that are either subsidiaries or divisions of banking institutions. There are advantages and disadvantages of each. For example, brokers can send loans to a wide range of lenders and because of this can accommodate a very wide range of prospective borrowers. On the other hand, because brokers can't underwrite or fund loans, they have less control over the entire process.
Banks may have access to certain products which are unique to the institution. For example, a special program for low-to-moderate income borrowers or a program for doctors on the other end of the financial spectrum. You also will not need to be licensed if you go with a federally chartered bank. On the other side of the coin, you may be restricted to only the bank's products and underwriting guidelines.
Independent lenders control the process because they can underwrite and fund, but also can use a variety of investors, thus can provide a wider range of products and qualification alternatives. It should be noted that some subsidiaries of banks act more like independent lenders as they can sell loans to a wide range of investors but still may have access to bank-specific products.
--Dave Hershman
Dave Hershman has been the leading author and a top speaker for the industry for decades with six books authored and hundreds of articles published. His website is www.originationpro.com. If you have a reaction to this commentary or another question you would like answered in this column? Email Dave directly at [email protected].
