This is the first blog of a four-part series which examines what market conditions are driving more and more brokers to make the transition to lenders
by Bob Doughtery
Speaking from personal experience, evolving from a broker to a lender is a big transition. Yet, many brokers today are considering taking the plunge due to a shrinking origination market, increasing competition, decreasing profits, and the pressure to close loans faster than ever.
Where does the pressure to transition from a broker to a lender come from? It starts with homebuyers and then cascades to everyone involved in the real estate and mortgage process. Today’s homebuyers expect instant gratification and take more of a hands-on approach than any generation before them. They are personally taking on tasks that were once reserved for mortgage and real estate professionals, including:
- Researching listed properties on websites like Trulia or Zillow and then taking a list of properties they want to see to realtors.
- Completing applications online to get approved, or pre-approved, for a loan.
Do some homebuyers still call a broker to walk through how to complete a 1003? Maybe, but it is no longer the norm.
Closing a loan in 14 to 21 days, instead of 30 to 45 days, is a challenge everyone in our industry faces, but for smaller brokers, this is often much more challenging because they depend heavily on external resources. They rely on someone else's underwriter, another person to clear a stipulation, as well as someone else’s closing department. Much of the process, from origination to closing, is out of their control. If a broker has the wherewithal to handle all the moving pieces, they can seriously look at migrating from broker to lender.
What are the benefits of becoming a lender? First, there is autonomy: You make the calls. You choose your technology. You choose your teammates. If you need to push one file in front of another file, you can because the process is in your control from beginning to end. Next, there is increased profitability. You receive more income selling loans to aggregators in the secondary market. Finally, there are more opportunities. As a lender, you are perceived as a more impactful player in the market. You could start up a correspondent and/or wholesale channel. You could even become a servicer.
Thinking about becoming a lender? Read my next blog to learn about some of the challenges brokers face when they become lenders.
Bob Dougherty is vice president of business development at Calyx Software, a leading provider of comprehensive mortgage software solutions for banks, credit unions, mortgage bankers, wholesale and correspondent lenders and brokers. He has more than 20 years of operations and business development experience in the mortgage industry. Previously, Dougherty was vice president of mortgage operations at Merchants Bank and chief executive officer of Timberland Mortgage Services, Inc., a multi-branch lender and underwriter of residential mortgage loans in Minnesota, Wisconsin, Kansas and Colorado.
