Negative perceptions from the global financial crisis are vanishing. Here's why
The global financial crisis in 2007-08 sent the reputation of the mortgage broker profession plunging for a time, with brokers cast in many quarters as some of the main culprits for a subprime mortgage meltdown that triggered a years-long economic collapse.
But after licking its wounds, the brokering space set about quietly rebuilding – and appears to have found favor in the eyes of US mortgage borrowers once again with market share last year inching towards the 25% mark, according to Inside Mortgage Finance.
Yury Shraybman (pictured top), a broker based in Philadelphia with Innovative Mortgage Solutions, can attest to that transformation in how the broker profession is viewed by US consumers. An exodus of lenders from the mortgage market amid the wreckage of 2008 convinced Shraybman that his future lay outside the brokering space, but he had a change of heart just over a decade later as signs strengthened of a broker revival.
The reputation of brokers since the subprime crisis, he told Mortgage Professional America, has “significantly improved” – especially in the past five years, when affordability challenges and an increasingly complex market have seen borrowers turn to brokers to guide them through the mortgage process.
What’s changed for mortgage brokers since 2008?
The profession has taken huge strides, Shraybman said, in improving its bruised image in the wake of the global financial crisis. “I feel like brokers and lenders have been blamed for that whole collapse, the crisis of 2008,” he said, “but over the last couple of years, people are actually noticing that [using] a broker is in the best interest of the borrower.
“I was in the mortgage business from 2000 until 2008 and in 2008, I got out. The reason I got out in 2008 was because I didn’t feel like there was a benefit for the borrower to go with a mortgage broker due to the fact that a lot of wholesale lenders left the business.”
Mortgage applications increased by 6.3% last week, according to the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending Nov. 22, 2024.https://t.co/fwpQ65Fg4n
— Mortgage Professional America Magazine (@MPAMagazineUS) November 28, 2024
That meant limited resources and wholesalers available to brokers – and rates and options were similar to those of the retail banks, Shraybman said, meaning there was little reason for a customer to go with a broker instead of straight to the bank.
But by 2019, there was a “huge benefit” in using a mortgage broker: “first of all, because we’re shopping around so we’re looking for the lower-cost wholesale lender,” he explained. “They can provide those better rates and better terms. And also, since the lenders are coming back, there’s also more options. You have the non-QM options that I feel have improved significantly over the last couple of years.”
How non-QM loans have emerged as an increasingly viable option for borrowers
The risk levels associated with non-QM loans are diminishing because borrowers’ credit quality in the space has improved, meaning brokers are increasingly turning their attention to the space as a means of generating business.
That’s also contributed to a spike in the number of lending institutions with an interest in the space. “I’ve been doing non-QM loans for the last five years and I’ve noticed a significant change,” Shraybman said. “A lot of lenders are coming in to do non-QM loans – and as the time goes by, it’s also easier [and quicker] to do non-QM.
“Before, a regular loan would take maybe 30 days or so to close and a non-QM loan was taking an average of maybe 40-45 days. However, over the last couple of years, I feel like they kind of evened out.”
At present, non-QM loans are closing in roughly the same amount of time as conventional and FHA loans, Shraybman said, due in part to the improving performance of lenders and their ability to innovate to spur quicker results. “Lenders are catching up with technology,” Shraybman said. “They’re catching up with all of their products, with service, everything like that. There are a lot more options of non-QM lenders.
“So because of that, I feel like now, closing a non-QM loan should take no longer than it does to close a conventional or an FHA loan.”
Stay updated with the freshest mortgage news. Get exclusive interviews, breaking news, and industry events in your inbox, and always be the first to know by subscribing to our FREE daily newsletter.
