Three Reasons Why You Should Become a Mortgage Banker
What are three reasons to become a Mortgage Banker?
Why should you make the transition from Mortgage Broker to Banker?
Welcome back everyone, Sean Stephens here again with Broker to Banker Consulting where our goal is to assist with climbing the mortgage banking ladder!
In today’s topic I will break down and discuss three reasons why a mortgage broker should consider the transition to a mortgage banker.
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In this high powered webinar, we will be analyzing the key benefits of becoming a mortgage banker, discuss the operational risks involved, analyze proven risk mitigation techniques, and review key partners to have in your tech stack that will improve your lending efficiency.
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What are three reasons to transition from Mortgage Broker to Banker?
As a starting point, it is important to remember that this is not about mortgage broker vs. mortgage banker, because either business channel can be extremely successful.
However, the mortgage industry today is experiencing significant margin compression due to higher rates, low inventory, a record loan officer population, and competition from all directions.
As the market tightens, mortgage professionals are continuing to look at ways to increase profitability, improve their market share, and create a repeatable referrable business model.
With that being said, more and more originators are looking to transition from either broker to banker, non-delegated to delegated correspondent, and even branch manager or top-producing loan officer to business owner due to the following reasons:
First off, once you become a mortgage banker you can expect increased margins and overall profitability.
Upon discussing the non-delegated vs. broker pricing question with various lenders, I found that it is reasonable to expect a pricing improvement of up to 25bps for non-delegated transactions.
For example, if you are closing 10 loans per month with an average loan size of $400,000 this translates to par:
- 25bps X $400,000 = $1,000 per loan
- $1,000 X 10 loans = $10,000 per month
- $10,000 X 12 months = $120,000 per year
Also remember that because pricing varies, it is critical to optimize your investor set and align your key investors with loan products being produced.
Additionally, if you are considering making the move to delegated delivery, this has the ability to increase margins even further, but the mortgage banker must understand the increased risk that goes along with underwriting your own loans when compared to a non-delegated lender whose end investor is handling the approval process.
Increased profitability also provides the mortgage banker with the ability to:
- Compete for and attract top producing loan officers
- Retain existing loan officers and branches as well as reduce staff turn-over
- Offer competitive and compliant loan officer compensation plans
- Increase purchase money volume & expand additional niche product offerings
- Increase loan production and scale your business
Now, the issue of control is almost as important as profitability due to the improved service levels that can be offered. When I hear originators say that brokering loans is easier, I find that especially hard to believe due to all of the extra steps involved in coordinating everything from the initial LE, appraisal, COCs, CDs, and even getting the closing documents delivered to the settlement agent. All of those items are out of a mortgage broker’s control!
Once you are a mortgage banker (non-delegated or delegated lender), you are in control of the initial disclosures, change of circumstances, preliminary CD, and closing documents.
You also have the crucial ability to control when the appraisal is ordered. In a tight market, it is critical to be able to order the appraisal as quickly as possible in order to ensure transactions stay on schedule while at the same time being able to deliver a repeatable referrable service level.
Additionally, what many don’t realize is that once you become a mortgage banker, you have more flexibility with issuing lender credits. For example, if an unforeseeable issue comes up that requires additional cost to the buyer, as the mortgage banker, you now have the direct ability to issue a lender credit to cover that cost. This allows you to keep the transaction on track, maintain high service levels with your referral partner, and reduce the cost to your client.
Improved pricing and more control over the loan process provides an advantage to gain purchase money market share and brand yourself as an expert in one of the following:
- FHA 203K Loans
- USDA Rural Housing
- Non-QM Products
- Construction Loans
- Manufactured Homes
In high volume environments, time can kill both deals and relationships. As the mortgage banker, you have more control over the process and are not subject to the same turn times that you would be in the broker channel.
Being able to cater to purchase business is critical for long term growth and protecting margins, because increased competition is already here and every basis point counts!
Now, wouldn’t it be nice if there was a blueprint available that would walk you through the steps on how to climb the mortgage banker ladder! Well, that is where we step in to help with our practical expertise and understanding of the process from mortgage licensing, investor approval, warehouse bank selection, third party fulfilment providers, E&O and Surety bond companies, origination strategies, coaching, consulting, and more!
Take advantage of our complimentary 30 minute strategy call where we analyze your situation and discuss a banker transition process step-by-step!
Just call or email to schedule a convenient call back time and let us show you the Path to Prosperity!
Sean A. Stephens, Esq., CMB®
Broker to Banker Consulting, LLC
Call/Text: (714) 844-7146
Toll Free: (866) 989-0564 Ext. 419
Sean A. Stephens, Esq., CMB®
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