The wholesale mortgage channel continues to grow every day as retail loan officers choose to become brokers and broker owners. Brokers are better situated to serve borrowers because of their ability to shop loan options, which not only means they can price competitively against the larger retail operators but can also serve borrowers needing unconventional loan options.
As the mortgage industry transitions from a refinance heavy 2020 back into a purchase heavy 2021 and beyond, brokers are positioned to take even more business from retail. The added flexibility afforded to brokers along with their ability to work with borrowers seeking unconventional loans gives them an advantage over retail.
Wholesale Mortgage is Growing Rapidly
The wholesale mortgage channel is in a continued state of growth as more and more retail lenders cede market share. Wells Fargo, the second-largest mortgage lender in the U.S saw its market share drop by 12.5% in the fourth quarter of 2020. United Wholesale Mortgage, which originated $54 billion in mortgages during the third quarter, was one of the biggest benefactors.
The Association of Independent Mortgage Experts (AIME) has also seen the effects of this channel growth firsthand. AIME’s Brokers Are Better Facebook group topped 11,000 members, growing 50% over the last twelve months. The Women’s Mortgage Network Facebook group, AIME’s other major Facebook group, has seen a 256% growth in membership over the last year and is close to topping 3,000 members as well.
As the industry shifts away from the re-fi boom brought on by low interest rates, brokers are perfectly positioned to continue pulling market share away from retail operations. The wholesale channel can continue its growth by bringing in individuals completely new to the industry as well as drawing talented loan originators away from retail operations. The wholesale channel will only benefit from a larger and more diverse talent pool that can compete with retail.
Why Make the Move from Retail to Broker?
Every day more and more individuals make the switch from the retail mortgage industry to the wholesale channel. Many are frustrated with the poor loan options they can offer borrowers. Others are frustrated with missed closing dates, which can oftentimes cost their clients their potential new home.
For JP Hussey, Owner, and Founder of The Hussey Team – Mortgage Advisors his move came from a lack of control. Before going wholesale, he worked for Wells Fargo.
After about a year there, JP saw a lot of his retail partners moving away from working with big banks because they too often missed closing times. He realized a big bank did not allow him the flexibility he needed, so he left for a smaller correspondent lender, but even at that lender, there was still a lot of red tape and middle management that restricted JP’s ability to help the borrower.
JP’s “aha moments” as he put it, came when he was outpriced by a local brokerage. Losing that loan made JP realize he could be more competitive and have more control over the entire loan process if he became a broker.
“I said, hey, listen, it’s already a tough business,” Hussey said. “This is my shot to really take my brand to another level and really own it and go all-in with it. So, I decided to open my brokerage. Now we have so much more control.”
Now as a broker, Hussey has complete control over his clients’ loans and can shop around for the best price because he can work with a variety of lenders, which JP loves because many times he is brokering loans with his neighbors or their friends and families.
Mike Cox, Mortgage Broker and Owner of Mortgage Nerds, had a similar journey to JP. He spent over 20 years working for a retail operation focused on VA loans. Near the end of his time there, he became very aware of the inefficiencies on the retail side both on processes and pricing. He would often see brokers quote prices that he thought were impossible.
“Pricing would come up that brokers would say they’re offering veterans and I’m like, ‘there’s no way that’s real, like, there’s no compensation in there.’ I just kept making excuses,” Cox said.
Cox started to do some research and saw the disparity between the loan options he was able to offer veterans and what brokers were offering them. That gap, along with a lack of transparency on the retail side pushed him to go wholesale.
At his retail job, Cox had a goal to do $10 million in loans in a month. His retail branch came close a few times but never reached that goal. As a broker, he has been consistently hitting and exceeding that goal month in and month out.
Flavia Benson, owner of Dovetail Mortgage, originally entered the retail mortgage industry in 2013, but she quickly became frustrated with how often her company missed closing dates, which can make or break a borrower getting a home.
She left the industry in 2016 and did not return until 2021. By that time, many of her former colleagues had already made the switch to the wholesale channel and encouraged her to do the same. One, in particular, told her about AIME’s Spark program, which helps military veterans and spouses, minorities, and women on the retail side open their own brokerage in the wholesale channel.
Benson realized that as a broker owner, she could control many of the issues she had while on the retail side. She completed the program and opened her brokerage in May, receiving her first clear to close last month.
The Benefits of the Mortgage Broker Channel
Joining the wholesale channel offers brokers a variety of benefits they would never see on the retail side. Broker owners have the added independence of being their own boss, but even LOs have added independence from a lot of the corporate red tape.
Brokers also have the benefit of being able to work with a variety of lenders instead of being tied to their company’s lending options. This gives them a competitive edge and allows them to shop around for the best loan for their clients. Those varied loan options also mean brokers can help clients seeking unconventional loans.
Unlike the retail side, the wholesale channel also allows brokers to be more community-focused. Often, a broker’s clients are their neighbors or are referrals from past clients. Many brokers have even built an entire business around referrals from past clients, friends, and family.
A broker also does not need to go through years of training to join the wholesale channel as most individuals just need a few transferable skills from other industries. You can read AIME’s guide on how to get an entry-level mortgage job to learn more. Individuals do need to pass a licensing exam & meet NMLS requirements, which AIME’s training program, Ignite, can help you prepare candidates from outside the mortgage industry for.
The wholesale mortgage channel continues to see growth, which is why brokers need to continue their work of growing and strengthening the channel by bringing more individuals over from the retail side and expanding their current teams with support roles.
The broker community offers individuals flexibility, independence, and a community-focused perspective that is simply not available in retail. Unlike the larger retail operations, brokers are members of their communities, which allows them to better serve their friends, family, and neighbors compared to retailers.
The benefits of the wholesale mortgage community:
- Added flexibility in loan options
- Community-focused work
- Ability to competitively price against retail
- The ability to work with a variety of lenders