I would also ask him to check his figures on “two-thirds of Americans choosing to work with mortgage brokers.” That is an inflated number which is steadily declining as the hordes of uneducated, uniformed and deceptive mortgage brokers are leaving this business in droves.

And no – I am not a mortgage banker, do not work for a depository bank or other lending institution and quite obviously am not a mortgage broker – thank God.

I take it you are on vacation and hope you have an enjoyable and relaxing time while you are away from the rat race.

When you get the time, I had a couple of other questions for you.

You mentioned how a mortgage bankergets anywhere from a few percentage points to a quarter or half-again higher interest rate when they sell their loans to an investor.

That being the case, when during the loan process, do they know who the actual investor is going to be and what they are going to get for the loan when they sell it?

Thanks

I wonder if you could expand on a couple of things you brought up. I’m interested in knowing more about the part where you said bankers may be able to put the loan with another investor if the original one develops problems. Could you go into a little more detail on how this would work?

Second question is I am curious about why you stopped temporarily from operating as a mortgage banker. What were the problems you were running into and are you now back doing most of your business as a banker versus as a broker?

Thanks for the info.

First – I would identify small in terms of volume of loans funded. Let’s say anything under $15 million/month in terms of funded loans. I think that is rather small.

Second – Mortgage bankers unfortunately are not immune to the shifting landscape and suffer from the same inability to fund as the brokers who experienced the AHM shut down. If you are a banker that is planning on selling a loan to AHM and they shut down the loan doesn’t fund (just like brokering). The one strength that bankers have in this instance is that based on the loan program it may be eligible for purchase by more than just one investor, in which case they can fund and sell to the back up investor. If the mortgage bank is set up that way then that is definitely a benefit – unfortunately I know too many small ones that operate like brokers on steriods and don’t have that flexibility. But if you have it – it is an asset.

Question 3 – Operating as a mortgage broker is “easier” in terms of overhead and such, but being a banker has some distinct advantages from an ownership standpoint: 1. increased revenue from the costs mentioned above 2. potential expansion in to wholesale lending (having broker relationships to go along with retail) 3. licensing issues – state requirements are different for lenders v. brokers. Some states require an in-state presence for brokers but not for lenders, etc.

Did I misstep? No. I stand by what I said. I am always honest on my blog even if it sounds detrimental to my business. I choose candor over an extra lead from the blog.

My sentiment is one of the main reasons we temporarily stopped banking – we couldn’t be as good as we wanted to be banking. We were good, but I knew we could be better, and there were some internal hangups re: banking that were holding us back from an organization standpoint. Plus once New Century went down we decided we didn’t want to have the liability of funded loans that couldn’t be sold. We still maintain our banking ability but have made a decision to shutter it temporarily and just stick at putting loans in to solid, stable investors.

Thanks for the comments!

What would be your definition of a “small mortgage banker”? Would you base it on the number of loans originated per month or is it a combination of different factors?

Also, would a mortgage banker be a safe avenue in these times where some of the wholesale lenders the brokers may be using are failing to get the loan funded at closing as with American Home Mortgage?

Final two questions. You didn’t come out very strongly in favor of using a mortgage banker over a mortgage broker and made it sound like operating as a mortgage broker might actually be a lot easier to do with less overhead and I would guess headaches. That being the case, why did you decide to become a mortgage banker?

And was it a faut paux on your part to state “if you had to choose between a broker and a small mortgage banker to always go with the broker.” after admitting you are in fact a small mortgage banker yourself? Sounds a bit contradictory.

I just wrote on this same topic, but with more of an emphasis on the ethics involved as opposed to the “deal” for the borrower.

http://allpacificmortgage.blogspot.com/2007/08/great-mortgage-lender-vs-mortgage.html

The questions you offer are excellent starting points – I added 7 more here which I think are in line with your overall direction.

http://tinyurl.com/2psq8l

And you are right – it is 100% more important to pick the right individual instead of the institution type.