We have seen the trends of big banks that are retreating away from the market of wholesale lending, mainly because of the financial crisis wake. Three of the big banks who have changed their approach include JPMorgan Chase, which left the business in 2009. Next, the wholesale operation side of the Bank of America closed their doors in 2010. Finally, 2012 was the year that Wells Fargo decided to walk away from wholesale lending arena as well.
Even in 2014, we are still seeing changes that are happening with the big banks. For example, one of the more recent events was that of Fifth Third Bank, who announced in March that they were choosing to exit the business of wholesale lending. They credited their decision to the major changes that have happened in the industry over the past few years.
Filling the Void
With all of these changes, what does this mean for wholesale mortgage options? A void has been created as the big banks have left the wholesale lending market, which means that the residential lenders can step in to fill the gaps on the regional and national levels. As a result, more opportunities are opening up for wholesale residential lenders.
The speculation is that the big banks are stepping out of wholesale lending because they are having a hard time turning a profit on these types of loans. On the other hand, wholesale mortgage lenders have lower costs to manage their business, which means that they can turn a profit.
Local brokers can provide low-cost options, which the bigger banks are unable to compete with. The cost of origination is lower since wholesale mortgage lenders don’t have the high overhead costs that the bigger banks are facing. When brokers partner up with a wholesale lender, it fills in the void that has been created.
Improving Communication
There are a lot of opportunities within the wholesale arena, and the best way to fill the gaps is to have open communication between the lenders and the brokers. Wholesale lenders can offer a wide variety of loan program options, giving the brokers a range of choices to choose from. As a result, the business is covered in a full spectrum. On the other hand, working with a bank means that you have one option to select from, and that product generally stays at the same price.
Maintaining communication is the key to wholesale mortgages, so that everyone can maintain good relationships. Without communication, these issues can become very complicated, and cause bigger problems in the long run.
To learn more about wholesale and mini-correspondent lending, spend some time looking through the resources that are available here at DaveKevelighan.com. My goal is to help you stay ahead of the trends in the housing and the mortgage industry, and I try to provide you with easy access to information about mortgage programs. You can learn more by looking through my website or by calling me directly at (303) 520-0004.
