I have spent a great deal of time trying to understand the latest developments in the Mortgage Broker movement in lending and their more recent efforts to distinguish their value from other business models. In doing so, I approach this with one single theme – consumers benefit from a diversified mortgage industry.
Mortgage Brokers, Independent Mortgage Bankers, Banks, REITs, Credit Unions, Community Banks are all part of this ecosystem of competition that finances home ownership. Some may operate as retained servicers, while others may sell their servicing on either a bulk or flow basis. Some may retain ownership of the MSRs but sub service to help scale operational costs. Some hold loans on their balance sheets. Others may sell all their loans to investors whether service retained or released. Some address the consumer through a more distributed retail model, while others may operate off of a centralized, more digital, platform.
In my past years in this robust industry, and as a former head of the largest trade group representing it, I have concluded two things.
First, the industry and the consumer are both better served by this diverse, competitive, and creative set of business models. Choice is what makes the industry great. I have always opposed concentrating this business in the hands of a few lenders. I promoted, and still promote, the equal access and level playing field for all lenders.
Second, business models will change as innovators enter the market and consumers will win. Uber destroyed the taxi industry and consumers benefitted. Amazon is challenging storefront retail. Streaming music services wiped out record stores. The list is long and yet the mortgage banking industry is just now on the precipice of real change, driven by innovators.
This latest broker movement stands out to me in terms of what this newest innovator has done for the broker business. The movement is led by a proud, unashamed, advocate for the support and expansion of mortgage brokers. This new team has forged important relationships with wholesale lenders and technology providers who will commit not to re-solicit clients of brokers in return for loyalty to them as preferred loan buyers and make the experience better for their clients.
This has resulted in the development of some new and and intriguing improvements and product options for the mortgage broker industry. As one who both brokered loans in the past and also managed wholesale lending operations at more than one lender, I applaud the intensity, energy, and determination that this effort brings to the table. Brokers bring the potential to represent a diverse set of lenders all under one roof. Like an independent insurance broker versus one beholden to one large insurance company, this business model has a unique value proposition.
I believe that no single business model holds an exclusive to better terms of business or service to their clients. Some are better at one thing, while others may be better at another – whether jumbo, conventional, USDA, FHA, VA, or non agency. That’s why I support the diversity and competition.
In the end, the consumer will win as long as they make sure to look at the options and shop their options before settling in on one particular offering or individual.
I will say this though, as a lifelong salesperson, mortgage executive, and policy leader, I abhor degrading others to somehow uplift ones own agenda. Brokers should be clear about the value they provide to the market without denigrating the competition. Banks and other lenders should do the same – as should all in this industry. Everyone in this business helps families achieve the American Dream of home ownership.
The concept promoted by this new broker movement is appealing to me. It says that brokers represent multiple options and will present the best one available to the borrower versus depending only on one investor. It also says that they care about the borrower beyond just that transaction. Brokers under this theme can establish a stronger foothold by conveying the relationship value of working with a broker who will always care about their interests and not try to only sell them products and terms based on a limited set of options.
I liken this to one large insurance company that advertised that they will show the consumer all of the competitions prices along with theirs. This was done in an effort to build trust. When I recently changed insurance companies I went from a single-source, large insurance company to a broker who offered me variety. I did this because I needed a diversity of insurers and only a broker could make that happen.
My closing advice to all in our industry; let’s not denigrate others in an effort to promote our brand or model. We are all better than that. Lets package the positive about our value proposition versus the negative of the competition.
Lets applaud innovators and make a point to avoid denigrating others. This modest change in behavior can make this entire industry better, help consumer, and align us all in our efforts to be the best at what we do.
By the way, I want one of your T-shirts
By David Stevens
David H. Stevens, CMB, is former SVP of Single Family at Freddie Mac, former EVP at Wells Fargo Home Mortgage, former President and COO of the Long and Foster Realty Companies, former Assistant Secretary of Housing and FHA Commissioner, former CEO of the Mortgage Bankers Association