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Article Excerpt
The current refi boom has brought waves of new brokers into the business. Lenders are carefully monitoring the loans from new brokers to find business partners worth keeping.
STRONG RELATIONSHIPS BETWEEN MORTGAGE brokers and wholesalers are critical to wholesale lending. There is nothing new or trendy about that. Wholesalers depend on brokers to bring in good business and to act ethically in their dealings with the mortgage-buying public. Wholesalers have long recognized the need to ensure that their brokers are adhering to the highest standards.
Such considerations have become even more important in the current record-breaking refinance market, where there has been a surge in the number of mortgage brokers.
Mark Hammond, chief executive officer of Flagstar Bank, Troy, Michigan, says that the growth in mortgage volume has attracted people to the industry. There are more brokers, more loan officers and more originators, Hammond says. This year is on course to exceed the $2 trillion--plus market of 2001, he says.
"Certainly the overall market is the best it's ever been," Hammond says, "both from a new-purchase standpoint as well as a refinance standpoint."
Hammond notes that brokers tend to be more efficient than some of the larger lenders at taking advantage of a refinance environment. Being entrepreneurial and relatively small, he says, these firms can ramp up easily, hiring and training new people. Brokers, he adds, generally gain market share in a good production environment.
"It's a very generous market," adds Robert Shrader, senior vice president at National City Mortgage Company, Miamisburg, Ohio. "We're at all-time production highs."
In such a heated atmosphere, signing up the right brokers demands efficiency in due diligence and thoroughness in checking backgrounds. And once the brokers are on board, their performance should be monitored carefully. A market that offers wide variations in products and terms can create temptations for some brokers to act less than honestly.
Mortgage brokers, of course, do not fall under direct federal supervision. And rules on qualifications and broker licensing vary from state to state. States also apply different degrees of rigor to background investigations for would-be brokers.
There is a potential wealth of information available on brokers. Wholesalers can look at a firm's financial performance, its disciplinary record, the quality of its marketing, its reputation within the local industry community, its competitiveness and the activities--both positive and negative--of its principal employees. The growing sophistication of technology is making all this easier. In addition to public records, online newspaper archives are easily accessible.
A small group
Jim Cassidy, head of the Wholesale Lending Division at SunTrust Mortgage Inc., Richmond, Virginia, has been pushing his salespeople for some time to work harder at building broker relationships.
SunTrust has been getting a lot of interest from brokers. Cassidy, however, is not actively looking to increase SunTrust's broker base. He is more interested in nurturing existing relationships.
Cassidy says that SunTrust's salespeople might each have a total of 30 to 40 accounts. In each case, he says, the majority of the business is likely to come from six to eight firms.
SunTrust Bank Inc., with assets of $108 billion, is headquartered in Atlanta. Its banking operation, with more than 1,100 branches, is concentrated in the Southeast, extending from Maryland and Tennessee in the north, to Florida in the south.
In 2000, Cassidy says, SunTrust did $3.6 billion to $3.7 billion in wholesale mortgage business, using 2,200 brokers. Twenty percent--or about 440--of those brokers represented about 78 percent of that business. In 2001, Cassidy says, SunTrust almost doubled its volume, with 10 percent fewer brokers. In 2001, he adds, 400 brokers brought in 78 percent of the business. Cassidy says...
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