I’ve spent years asking the best mortgage managers this question: who is your primary customer, loan officers or consumers? Most cater to LOs because most industry market share is still LO driven. But let’s dig deeper to see if this answer holds for leaders and LOs over full market cycles. And let’s put it in the context of today’s best wholesaler ask LOs to limit the options they have for consumer customers.
Note: Other than the title, I’m writing this without the company names so we can see how these mortgage channel themes hold up years from now. As Bon Jovi’s gospel says: “It’s the same, only the names will change.”
Who is the customer in the US mortgage market: LOs or consumers?
Ultimately, the consumer is the customer. Period. Without them, the US mortgage industry would not fund 7.8 million units in 2019, 12 million units in 2020, and 9.2 million units this year (per MBA).
And in an industry where most of the market share is driven by consumer-facing LOs, LOs are in control.
Where are they?
The top of the day American wholesaler (which has a 33.5% market share of broker-issued loans, according to the IMF), gave U.S. brokers an ultimatum to get rid of two other wholesalers (with 17.8% and 0.5% respectively). market share of brokers) as partners or “you can no longer work with us.”
This ultimatum comes after a few years of supporting a narrative that tells LO brokers how some wholesalers will rob LO customers after the loan is funded. Any LO who’s been here for a minute knows this brawler narrative isn’t black and white. It is gray for three reasons:
First, wholesale players change through complete cycles – today’s top 25 wholesalers are vastly different from those before 2008. This makes the freedom to choose wholesale partners all the more important in the long game of an LO broker.
Second, as we deepen this new era of only publicly listed mortgage lenders, maximizing shareholder value will ultimately lead to channel diversification, which means that all public wholesalers will ultimately be subject to channel conflict perceived by LO.
Third, wholesaler promises to LOs aside, service transfers are inevitable over full market cycles. Thus, the longer a customer remains in a given loan, the more likely it is that the service will be transferred from the wholesaler where OL financed the transaction.
LOs know that these market dynamics mean that it is up to them, not their chosen wholesale partners, to retain customers over full cycles.
Brokers: win the crowd and you will win your freedom
And all of you local brokers know this better than anyone because you’ve dedicated your careers to independence. Your line in the sand is not wholesaler A or wholesaler B.
It’s the freedom to choose wholesalers and the freedom to engage, retain and place your customers however you see fit.
The Brokers Are Better movement should focus its All In mantra on this consumer-driven long game instead of squabbling over the nuances of wholesale partners that don’t hold up over full cycles.
That said, I know that many brokers respond well to fight stories. So my message to you is that Proximo says to Maximus in Gladiator:
“Win the crowd and you will win your freedom.”
Respond to the mortgage customer, and the wholesalers will take care of you, ensuring your absolute independence.
To do this best in the long run, you need unrestricted access to all of the wholesaler’s options for pricing, guidelines, speed, underwriting certainty (especially critical for the buy market) and compensation.
You longtime players know this, but this is just a friendly reminder. And for those who weren’t in the game last cycle, here’s a one-sentence briefing:
When the pre-2008 boom erupted, brokers were used as scapegoats “rogue actors” by major market players who killed off wholesale divisions to focus on channels they could “better control.” “.
The Takeaway: The big players and their promises change, so keep your options open.
Or maybe another point to remember is: agree to onerous terms with a top player now and switch later if it becomes too limiting.
I understand that you had a difficult choice, and I wish you all success in your first phase of consumption.
The customer endgame for wholesalers
Now let’s bring that home with our central question for wholesalers: Who is your main customer: brokers or consumers?
Diehard brawlers will answer “consumers” for some of you wholesalers, as this feeds into their theory that you are using them to acquire customers you plan to steal.
However, we know the answer for ALL of you is that “Brokers” are your primary customer – and the different actions each of you is taking proves your commitment to Brokers, no matter how skeptical Brokers are about multi-channel players.
The skepticism of brokers underlies their independence and drives their “access to all options” value. It is therefore healthy that brokers have rallied against channel conflicts in recent years. But I humbly ask today’s best wholesaler: is it really necessary to go that far?
So far, you have fully proven that brokers are your main customers and you have already earned their loyalty.
Asking brokers to limit their options now compromises their fundamental value to consumers. And when your organization diversifies in the future, it’s just a tougher message reset.
I will be happy to share this message publicly if you become a purebred cradle-to-grave wholesaler. But shareholder accountability, good old-fashioned public company mergers and acquisitions, and time will tell.
And in the end, the consumer will remain the customer. Period.
This column does not necessarily reflect the opinion of the editorial staff of HousingWire and its owners.
To contact the author of this story:
Julien Hebron at [email protected]
To contact the editor responsible for this story:
Sarah Wheeler at [email protected]