If you are working as a mortgage broker, or in any other position relating to wholesale mortgage lending or mortgage brokering, then you know that there are unique challenges to working in this industry. Some of the disadvantages to working as a broker include the fact that there is a stigma about brokers that borrowers don’t always like the idea of interacting with a middle man, and they will need to pay the costs of origination fees to the lender.
The main stigma about mortgage brokers started as a result of the 2008 financial collapse, because many people experienced problems that arose during that time. Because of this stigma, people are more cautious about working with a middle man, and they prefer to work directly with the company that is lending the money.
If you are a broker, and facing any of these situations that have been discussed, you should know that there is a different option to consider, and that is to become a correspondent lender. Here are a few advantages for you to consider:
Pricing is Competitive
When working with a borrower that can’t qualify for financing from a bank, then it might be hard to find a rate that the borrower will be happy with. Each customer wants to know they are getting a low rate for their loan, and as a correspondent lender with various financing options, you can often find lower rates to make those customers happy.
Fewer Borrower Fees
Since lenders usually charge lender fees for underwriting and doc preparation, this means the broker is generally limited to a total 3% Lender Paid Compensation that can be charged to a borrower on a transaction. If you make the change to be a correspondent lender, you are in a better position so that you can earn more money on each deal. Also, the premium that you earn stays undisclosed, because the information is kept between you and the investor for the deal.
Use Your Own Name for the Closing
If you are a broker, then the deals are closed in the name of the lender that you are working with. On the other hand, as a correspondent you can close the deals in the name of your own company. One of the advantages to closing loans in your own name is the fact that you can now advertise as a lender. This new angle to advertising might put some customers at ease, because they are uncomfortable about the idea of working with a broker who is a middle man.
As you can see, there are some strong advantages to making the transition to be a correspondent lender. If you are in the Colorado wholesale mortgage industry and looking for ways to make your business easier by expanding the reach of your business and earn more money, then you might consider the option to become a correspondent lender.
If you have additional questions about distinction between correspondent lending and brokering wholesale mortgages, please feel free to contact Dave directly or call (303) 520-0004.
