An increasing number of mortgage brokers are considering making the move from Broker to Banker. Is it right for you?
Reasons to Switch
The reasons to make the switch are becoming more compelling than ever as the loan volumes contracts and the regulatory environment gets more uncertain. Here are some of the reasons some are making the move:
More money can be made as a banker by selling your loans into the secondary markets.
You definitely have more control over the process.
Your company is worth more as a mortgage banker.
RESPA reform threatens to make the “playing field” uneven.
While these are compelling reasons to get you started contemplating the move from broker to banker, it doesn’t always work for everyone. Why? Because there’s more involved in being a banker… often times a lot more than some realize. You need to “count the cost” and the “cost” is more than dollars. It can have more to do with adjustments to your way of doing business. For an example, as a mortgage broker you drive to get every deal funded… right? Secondary Marketing by MBS is the monthly journal for top mortgage professionals in charge of originating, buying and selling loans and mortgage loans. The MBS Group is the alternative energy industry's premier monthly publication serving the specifiers, sellers, and installers of alternative secondary marketing. Programs find out how to get connected to our secondary marketing programs and let us help you manage your pipeline whether you sell to us for cash or swap for secondary marketing research, or desk research, already exist in one form or another. That’s how you make money. And if the loan goes bad, you’re not penalized, short of fraud. As a mortgage banker you still want to fund every good loan possible, but there are more ways in which a loan can come back to bite them. There’s increased operational risk, market risk that was never there before and increased buy back risk. These are all manageable risks if you spend the time and money to get the advise. The old saying, “An ounce of prevention is worth a pound of cure” truly comes into play here. It may make sense to work with people who can help you understand and manage the additional risk involved with being a banker.
The 1st Step: Applying for a Warehouse Line of Credit
Your initiation into the land of mortgage banking starts with establishing a warehouse line of credit to fund your loans. Your company—and frequently you personally—are financially responsible for these lines. When warehouse bankers are making decisions about offering you a line of credit, they consider a number of factors: net worth, credit history, experience, character, and credibility. “Not all warehouse lenders are created equal.” So, here are some questions you may want to ask when applying for a line.
12 QUESTIONS TO ASK WHEN LOOKING
FOR WAREHOUSE LINES OF CREDIT
What are the minimum requirements to get approved? (i.e. minimum net worth, etc.)
What are the fees to apply for a warehouse line?
Are there non-usage or commitment fees?
What is the Interest rate and what index use to calculate the rate? (Libor or Prime)
What are the funding fees charged per loan?
What are the wire fees charged per loan?
What products can I put on my warehouse line?
What is the advance rate (i.e. haircut)?
What documentation is required to fund?
What is the funding cutoff time?
Is the lender flexibility about occassionally funding in excess of line amount?
How long do I have before I have to have the loan off the line?
What type of reports will the warehouse lender provide and do I have access to them online?
