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In short, no.

A common question I receive from clients is: how can a broker obtain a better rate from a big bank, than the client can by walking into their own branch?  I tell them it is due to efficiency. The truth – though the banks would never admit it publicly – is that they actually enjoy receiving applications from independent mortgage brokers because we are typically more competent, better trained and more efficient than the bank’s staff. Additionally, we only receive payment on the actual deals we close, as opposed to the direct bank employee, who is paid regardless of what they actually produce. For virtual banks, independent brokers are the preferred sales channels as well. There is a need and place for the independent mortgage broker.

Recent news on this subject has caught my attention. The first concerning an article in Mortgage Broker News, that a major bank is paying realtors a direct fee for referring mortgage clients. This is not new; it has been happening for years. I don’t see that practice as offensive, all is fair in love and war, but I would question the realtor that advises clients to deal directly with a major bank as opposed to an independent mortgage broker. A bank’s advice is obviously biased towards the bank and their products, while the independent broker has no such biases and works in the best interest of the client.

The second article dealt with lenders squeezing out the independent brokers who cannot bring a significant number of yearly deals to the lender, or who have poor closing ratios. Again this has been a trend in our industry for many years and has basically eliminated the “mom & pop” brokerage because they simply can’t compete. I have no problem with closing ratios, but Mortgage Brokers should not be taking the “shotgun approach” to finding a lender (sending a deal out to 30 lenders to see who accepts) out of desperation to close a deal. That approach is a waste of time and resources of the 29 lenders who don’t ultimately fund the deal. If we want to supply the best rates and service then there needs to be built-in efficiencies.

I do take exception the minimum deal requirements as this practice is very short sited on behalf of lenders. When I am talking to lender representatives on this subject I ask them: “Is your top producer today the same person it was 5 years ago?” The answer is always “no.” My follow up question is,”So if you had cut off your top producer when they were just getting started, you would not have that business today, correct?” At that point, they recognize the flaw in minimum deal requirements. I get a chuckle on these lenders who try to buy my business through volume bonuses and other perks. If you “buy me”, then I become biased in my advice. If I let that happen, I should go work for a bank.

Are the big banks killing the independent mortgage broker? Why bite the hand that feeds you?

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