Bankers’ Hours column: Mortgage brokers are alive and well
Remember mortgage brokers, the alleged vultures that settled on the shoulders of unsuspecting borrowers and took their homes away, or pecked their eyes, whichever earned the highest commission?
A major impetus in the creation of the Consumer Financial Protection Bureau was the eradication — or at least the incarceration — of the Snidely Whiplashes of the lending business. And, if the feds didn’t get them, the smart money figured that the marketplace would take care of it.
As the Great Recession wound down to its final whimpers, and the casualties and crash debris were swept to the gutters of the financial industry to make way for the brave new world of lending, loan originators proliferated. Big banks ramped up mortgage divisions; online lenders hawked loan apps that are just an icon click away. With all of this, who needs mortgage brokers?
As it turns out, quite a few do. Or they decide to employ them. Why in the world would anybody want to do business with vermin? Well, one reason might be that the brokers that survived the Great Meltdown sport a high degree of professionalism and competence. In retrospect, as a group, they were no more responsible for the bursting of the housing bubble than were CEOs of Wall Street investment firms, bankers, builders, Realtors and, yes, borrowers.
Banks, the very entities that were supposed to put brokers out of business, are a big factor in the survival, and even expansion, of the broker profession. A lot of financial institutions, and especially smaller ones, have a very hazy idea of what their business actually is. They’ll tell you that it’s taking deposits and then lending the money out, when it’s really facilitating the movement of money, in any profitable and practical means possible.
So a surprising number of banks don’t even offer residential mortgage loans to their depositors, even though they could easily do so. They might extend themselves to refer the loan elsewhere but certainly not to the local branch of TBTF (Too Big To Fail) National Bank down the street. Rather, the deal goes to a mortgage broker.
But what about the banks that have an active mortgage lending operation, as many do? What about an online lender like Quicken Loans? Don’t they take pretty good care of their customers? Yes, they do — if you’re the right kind of customer, that is. However, if you, or your property, doesn’t fit the post recession Fannie Mae or regulatory cookie cutter profile, then you’re pretty much out of luck. If you don’t fit the mold, that online lender that touts fast funding and low rates doesn’t have an alternative deal for you.
A mortgage broker often does. He or she can represent a variety of lenders, ones that, for example, will make loans on so-called “hobby farms” in rural areas, or condotels in a Colorado resort. Some even have access to private lenders.
And then there’s the fact that we bankers are, well, bankers. We think like bankers, and we act like bankers. Bank mortgage loan personnel are good at taking an app sitting behind their desks, as long as it’s between eight and five (with an hour off for lunch). Very few of us will show up at a borrower’s home after supper, or on the applicant’s job site during lunch, or come in on a Sunday afternoon to take an application.
Brokers will, and do.
I do some consulting for small banks in connection with residential lending. In one instance, a client’s ad agency spotted a social media query from a home buyer: “Where do I go to get a home loan? I don’t want to deal with a bank.” Her reason: “I don’t think banks care about me as a customer, and they take a long time to process a loan.”
Not surprisingly, mortgage brokers do absolutely nothing to disabuse borrowers of this perception.
Pat Dalrymple is a western Colorado native and has spent almost 50 years in mortgage lending and banking in the Roaring Fork Valley. He’ll be happy to answer your questions or hear your comments. His e-mail is email@example.com.
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