Despite the fact that nearly everyone expects the refinance market to dry up this year, the Fed has yet to raise interest rates and so lenders are still very busy. Even so, the nation’s largest wholesale lenders can already see the writing on the wall. They know that when rates rise and the business slows, the wholesale lenders with the best third party originator network will win.
Now is the time for mortgage brokers, who are every bit as busy as bank and credit union loan officers, if not more so, to pick their partners. While we see a fair amount of posturing on the part of wholesale lenders in an attempt to lock in brokers before the cycle turns, their efforts will only work if they offer what brokers want.
There are really only three criteria that the broker needs to consider when deciding what wholesale lender to sell their production to: interest rate, product mix and process.
1. Interest rates.
Mortgage borrowers, at least refinance borrowers, are interest rate driven. If the broker can’t provide the deals they are looking for, they won’t get the business. This is true even on the purchase money side, though less so. Brokers are going to want to make sure that the wholesale lender they choose will give them products to sell that have interest rates low enough to get the prospective borrower’s attention.
2. Product mix.
Of course, rate is just one of the factors that the borrower takes into account when choosing a lender. The other has to do with the types of product available. Brokers want to work with a wholesale lender that offers a broad enough product mix to meet the needs of a wide range of borrowers, from first time home buyers to Jumbo borrowers.
How easy is it for a broker to get the deal closed? That’s extremely important in a highly competitive market. If it’s not easy for the borrower to get the application accepted by the lender and then processed, the broker will quickly get frustrated and seek out a lender who can do a better job. A big part of this comes down to technology. We know for a fact that the LOS in use by the wholesale lender has a huge impact on the brokers that sell production to that firm.
Technology is even more important for lenders who pursue an omnichannel strategy. This is very popular right now because it’s not easy to know where your business will come from when it seems to be coming from everywhere. When it slows down, lenders will want to have active channels that allow the borrower to get what they need regardless.
We currently work with lenders who are doing brisk business on both the purchase and refinance side, through retail, wholesale and correspondent channels. It takes a robust technology platform for this strategy to work.
Even then, it works best when the lender has a back end strategy that allows them to build their customer base and maintain the servicing rights to make up for the thin margins.
As long as the wholesale lender can deliver the three things mentioned in this post, the three things brokers want most, they will be in a good position to build a strong TPO network before the business turns.
By Joe Camerieri, EVP, Client Account Management at Mortgage Cadence
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