Should Your Mortgage Broker Company Stick It Out or Find A Different Opportunity?

I read an article in a Buffalo newspaper that quoted a spokesman from the New York Banking Department who revealed that 315 mortgage brokers gave up their licenses last year. The number of licensed mortgage broker companies and loan originators is down in every state. There are a number of reasons for this situation. I’m sure you’ve experienced many of them.

The requirements of the SAFE Act have caused many loan originators who cannot meet its qualifications. There were loan originators who had criminal pasts, bankruptcies, bad credit, or no knowledge of federal and state laws who were working as loan originators. Many of these people have left or will be leaving the business as all of the loan originator licensing requirements become effective (no later than December 31, 2010). There are many loan originators who don’t deserve to be in the mortgage business, with their backgrounds, but I have spoken to many, who may not be able to stay in the business because of stupid decisions made when they were young or bad luck with their finances.

Others in the industry have spoken to me about their frustration with the requirements that the lenders are placing on them. Many lenders only wish to take applications from the highest volume brokers. But, volume is down all over the country. Most consumers are too nervous about their job situation to go out and buy a new house. Other consumers want to buy but cannot sell their existing home. Many brokers cannot bring the kinds of volume that the lenders insist on.

The new regulations are also causing mortgage companies to close up shop. Licenses cost more, surety bond requirements have gone up so the premiums cost more and the annual assessments have gone up as the need for banking department income is spread among a smaller number of licensees.

So, do you close up your business and work for a lender? Become a net branch? Leave the business? If you became a mortgage broker to make a lot of money, then the opportunities of being a net branch or working for a branch may make sense to you. After all, loan officers working for banks don’t need to be licensed as mortgage brokers or loan originators. You make the money without the headaches. Or you affiliate with another mortgage broker or lender and you are one of their branches. They worry about surety bonds and license fees. You just bring them loan applications and they pay you for them. There are many ways to stay in the business without necessarily maintaining your own mortgage broker business. There are companies out there that are looking for good brokers. You may want to explore every possibility out there and make a change to your employment situation.

But, if you feel that you provide a valuable service to consumers and you want to retain your independence, you need to hang on and educate your past and future customers about why an independent mortgage broker is better for them than their going to a bank. Mortgage brokers have not done the job they need to do to convince consumers that they are worth the fee that they are charging. The comments that were posted after that article that I read largely charged mortgage brokers with allowing fraud (if they didn’t cause it themselves) and with putting borrowers into loans that made the most money for the broker, not the loans that made sense for the borrowers. Are you doing anything to counteract these types of opinions? Can you give a borrower any reason why they should use a mortgage broker rather than going to a lender or a bank?

Some of you will hang in there because this is what you have been doing for the last 10-15 years. You feel that you are helping people, you like being your own boss and you believe that the shakeout in the industry will leave the strongest surviving and that will include you. If that is your reason for staying in business, go out and make your customers want your services. Show them how you help them when they are dealing with one of the biggest financial transactions of their lives.

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