As we set out on the eve of the 2018 Holiday Season, I like to bring in the holiday spirit by listening to Adam Sandler’s classic, The Thanksgiving Song. Adam reminds us that Thanksgiving is for all of us and that there is plenty of turkey, stuffing and mashed potatoes to go around. If you’re already thinking… get to the point Matt! Hang in there with me… it’s only the first paragraph. My favorite part in Sandler’s song is when he sings “Turkey for me, turkey for you!” however, as I sipped my daily cup of Foldger’s instead of following the words as they were so thoughtfully written… I sang “Business for me, business for you!” and it got me thinking. There is a legitimate war raging right outside our doors… and if you don’t believe that it’s a war… call it a “conflict” like we so often do in America but trust me this “conflict” is real whether you want to believe it or not. I’m sure you’re thinking “enough with the dramatics” what’s up Joy?! The “conflict” I’m referring to is the battle for each and every loan that’s out there… compounded with the battle of LO v. Broker, sprinkled in with age old battle of Retail v. Wholesale.
Before we dive in, I want everyone to know something… this whole idea of “whole-tailing” is propped up with no actual legal ramifications. I challenge everyone reading this to find me a broker contract that states “upon receiving a borrower’s 1003 application from the broker the lender is responsible for the underwrite, the closing, delivering the loan into the secondary market, absorbing all of the fiduciary and compliance risk as well as retaining the servicing rights (in some cases), the Lender is in no way eligible to solicit business from the borrower…” I know I’m paraphrasing, but it’s true. Now, is it ethically right (because that’s what this is… it’s ethics. No more. No less) to solicit that borrower knowing full well that the loan was provided to you as a result of the hard work put in by the broker? My answer is no. Ethically… it’s not right. HOWEVER, when did the mortgage industry become ethically responsible (don’t gasp at that… read HousingWire, ethics are thrown out the window daily)? It’s business. It’s a smart business move to pay handsomely for a loan from a broker, do all of the origination work on said loan, take on ALL of the compliance risk, forgo the premium for the servicing rights and retain them… and then when the market comes around, resell that brokered loan with your internal retail staff for double the margin. It’s smart. It’s actually REALLY smart and really lucrative. I see why it’s being done, but I also see why it’s upsetting to brokers.
I’d like to go on record saying that I FULLY support our broker partners, as well as the brokers we’re not partnered with and appreciate the hard work that goes into generating business.
I’ve personally referred friends and family (my mother specifically) to our broker partners because I believe in the broker model, but that doesn’t mean that I don’t understand or appreciate the revenue’s gained in doing loans through the retail channel. It’s an important part of building a COMPLETE and successful mortgage company… oh, you don’t believe me? Well… let me share a story with everyone. Before I moved to Ethos Lending I worked for Provident Funding and in 2011-2012 when the market was poised for a comeback, I worked with a group of individuals (with whom I’m still in contact with to this day) who helped build out Provident’s sub-servicing platform. Refi’s were falling from the sky and we pounced on the opportunity by building on what was already a fantastic servicing platform (we were rated #1 by Freddie Mac) and offering lenders an outlet to retain their servicing assets. Guess who our first client was… Shore Mortgage dba United Shore Financial dba United Wholesale Mortgage. Yep. That’s right. Before UWM became the largest wholesale lender in the country (a title held by Provident Funding during the earlier 2010s) they were a retail lender generating business from LO’s not brokers.
What’s my point? My point is that as company’s grow don’t fault them for doing things that are well within their rights as a lender. Loans are moved from lender to lender every day. Princeton Mortgage delivers loans via the correspondent channel to lenders who compete with us in the wholesale and retail space. All we’re trying to do is grow and we’re doing so in both channels. We don’t have a side. We’re committed to ALL of our customers at Princeton Mortgage. Brokers and borrowers alike.
So, I guess what I’m trying to say is… there is enough “Business for me, business for you!” Don’t allow the fact that we’re in the most competitive/margin compressed mortgage market we’ve seen since the Regan era (well I didn’t see it… I wasn’t born) blind you in understanding how every little piece of the mortgage machine works.
I hope everyone has a wonderful Thanksgiving and enjoys time with family and friends!
Talk to you soon!
MJ
The opinions expressed in this post are the sole view of the writer and do not reflect the opinion of Princeton Mortgage Corporation.
Photo by Peter Lloyd on Unsplash