Some time ago I received an email from Bill Wright, a retired broker and good friend. He wondered how the mortgage credit process had changed since he left the business. Much of this was helping borrowers find financing for their home purchases.
It was a fascinating question, and I replied that it would be a good topic for a column; Thank you, Bill.
Home loan production has indeed changed since the second half of the last century when Bill and I were both in the day-to-day business of financing home loans from a different perspective. Today, consumers are offered or subjected to a fully automated application, approval and conclusion process. Without question, it streamlines a process that was complicated enough in 1989, for example, and has become more complex with the addition of layers of federal and state compliance regulations
Back when Bill scolded me for declining a flawless loan, the bulk of home loans were funded by financial institutions, mostly savings (savings and loans). Every step on the way from filling out a rough application with the pen to the final table was carried out by hand. An IBM Selectric and a calculator were almost at the limits of technology.
Mortgage lending companies now finance and service most residential mortgages. Six of the top ten lenders are mortgage lenders, and only one, Wells Fargo, is in the top five. Quicken Loans and United Wholesale Mortgage are one and two.
Most non-bank loans are usually not made by company employees, but rather by mortgage brokers who use the lender’s software suite to accept the application and handle the deal until the loan is funded or denied. The mortgage broker is the initiator of the product that makes a lot of money for many people.
Of course, you can go straight to a lender; Quicken Loans and its subsidiary Rocket Mortgage, the division that perfected the lender’s automated processing platform, are running a robust direct media marketing campaign as anyone with a television knows. However, companies like Quicken and United Wholesale are focused on maintaining, feeding, and expanding the broker pipeline. They spend a lot of time and money training and supporting their broker partners as these partners lend a lot and do it professionally. This is the most cost effective way for any of these mortgage manufacturers to get volume and maximum revenue. And consumers enjoy working with brokers because they get expert advice on a difficult journey from app to close.
The value of the broker to a lender is evidenced by the announcement by Matt Ishbia, the CEO of UWM, that brokers who work with his company must sign an agreement not to do business with Rocket Mortgage or they will be subject to fines directly from the pages of Vito Corleone’s “Guide for Godparents”. It’s easy to see who’s at the top of Matt’s client list.
When a borrower goes to a broker for a home loan, they are paying no more than when they contact the lender directly. Brokers today are well trained, competent and highly ethical. However, the borrower is the broker’s customer or “customer” and the broker is the lender’s customer. After the financing, the borrower is still not a customer as you are in your neighborhood bar. When you walk in the bartender asks how the kids are doing, and the usual goes before you open your mouth to brag about your daughter’s last gate. When your loan enters the country of lending, you become a consumer who must be treated in strict compliance with the laws and regulations that strictly control the servicing of mortgage loan today. The lender has obligations and you have rights and recourse. But when you go into your lender’s service platform digitally or by phone, it’s not like stepping into Paddy’s Bar and Grill. If you don’t believe me, choose your lender.
So, Bill, something hasn’t changed. When I left the Marine Corps in 1961, I needed a job and answered an ad for help for an “MTG Apprentice”. “Mtg” meant “mortgage,” but I didn’t know. The first thing my boss said after I was hired and before I found out anything else was, “Always remember, brokers are our customers. They bring us the credits. Never forget that. ”At this point, I had an idea of what a mortgage could be; a trust deed and promissory note were way beyond my knowledge.
In those days there were literally no consumer protection or data protection laws. I had spoken directly to the broker about problems with a buyer’s loan application and was confronted by the borrower: “Why didn’t you speak to me, am I not your customer?” He had me there because the honest answer was: “No. “
As the preacher says in Ecclesiastes, “There’s nothing new under the sun.”
A native of western Colorado, Pat Dalrymple has spent more than 50 years in the mortgage lending and banking business in the Roaring Fork Valley. He will be happy to answer your questions or hear your comments. His email is [email protected].