Mortgage brokers are making a comeback in a big way! According to the Orange County Register, the mortgage broker market share hit 11.9 percent in California in 2018, up from around 5 percent to the highest level in eight years. This is great news for originators who are looking to get back into owning their own mortgage brokerage business!
Mortgage Brokerage History
Mortgage brokers made up 20 percent of the market in 2008 and more than 30 percent of the market from 2004 through 2006, according to an article in Market Watch, a trade publication. We know that the mortgage meltdown of 2008 created regulatory changes that led mortgage brokers to alternative channels. Those channels included retail net branches, retail operations, banks and credit unions. These channels provided support in compliance, products and marketing to address the heightened oversight of the CFPB.
Mortgage Broker’s Today
For the past several years we have been seeing retail branch managers and originators leaving their existing companies and becoming mortgage brokers. They are realizing that they can indeed own their own mortgage brokerage business and are stepping into the role as a mortgage broker.
Why are We Seeing This Trend?
There are many reasons, originators are becoming mortgage brokers, some include:
- Increased Resources Available for Mortgage Brokers
- More Control Over Timing and Products
- Better Pricing
- Desire for Branding and Ownership
Many originators are also realizing that consumers are moving away from the big “box banks” and want to do business with a local professional.
Steps to Becoming a Mortgage Broker
If you are considering becoming a mortgage broker, you may want to begin with the following steps:
STEP ONE
Research Licensing Requirements and Timelines
Each state has different licensing requirements to license a mortgage broker business. You can begin your search at the NMLS site.
STEP TWO
Select a Business Name & Determine Your Business Structure
Some states have restrictions on your business name, so be sure to check with your state to find out the requirements.
STEP THREE
Set up Articles, Operating Agreement and Register Your Business with the State
You will need to have these items complete prior to registering for your NMLS company license.
STEP FOUR
Find a Location
Some states have requirements for brick and mortar, so again, check with your state to find out the requirements.
STEP FIVE
Write a Business Plan
Having a solid business plan will not only help you get off to a good start as a mortgage broker, but it may also be a requirement when setting up relationships with some of your vendors, like your credit report service companies.
STEP SIX
Set Up EIN Number, Business Accounts, Insurance, etc.
These are standard business operation requirements, but ones you want to make sure you get set up at the beginning because you’ll need these items when you start doing business with vendors.
STEP SEVEN
Obtain NMLS Licensing
Once you’ve determined your state licensing requirements, set up your business name, structure, plan, etc., you will then apply for your NMLS company license. Some states take longer than others to approve your company license, so be sure to check with your state to find out their timelines.
STEP EIGHT
One of the biggest changes we have seen in recent years is an increase in the compliance, systems and business requirements for mortgage brokers. Brokers will need to set up their policies and procedures, qc plan, website, social media, CRM, LOS, POS and credit reporting vendor.
STEP NINE
Establish Wholesale and Warehouse Relationships
Mortgage brokers have the advantage of being able to work with a variety of wholesale lenders. This is a huge benefit to consumers, because wholesale lenders may provide a larger range of mortgage loan product options. You can find a list of wholesale vendors at media channels like National Mortgage Professional Magazine or by attending an industry conference. Wholesale lenders are growing and there are many existing and new wholesalers who are ready to help you as a mortgage broker. Be sure to review your market and set up relationships with wholesalers who will provide you with support and products for your market. As a mortgage broker you will set up a compensation agreement with each lender.
Mortgage Brokerage Needs
We’ve reviewed the steps to setting up a mortgage brokerage business, next we’ll explain in more detail, some of the services and vendors you’ll need.
TECH
Today’s mortgage business is often run by technology and there are many great options available for mortgage brokers. In previous years, technology companies only focused on larger retail operations, but thanks to the emerging trend of mortgage brokers, we are seeing more and more technology companies realizing the power of this market. Here’s what you may want to obtain from your technology vendors:
LOS – LOAN OPERATING SYSTEM
You’ve used an LOS for many years and it’s an important part of your operation, so take time and review a few to find out the best LOS for your business. Many LOS platforms have great pricing options for mortgage brokers.
CRM – CUSTOMER RELATIONSHIP MARKETING
Marketing is one of the key factors to building your business and having a robust CRM will help you to streamline and manage your marketing efforts.
COMPLIANCE
You’ll need to set up policy and procedures, quality control plans, LO compensation agreements, etc. This may seem a bit daunting at first, but the best advice is to look for vendors who know and understand the mortgage brokerage model. Most state regulatory agencies may ask for these documents when you apply for licensure and likely will ask for a copy of your policies and procedures when they conduct an exam, so you will want to set these up in the beginning of your business structure. In fact, many state agencies are conducting what is called a “Welcome Exam” when you set up your mortgage brokerage. This is actually a great thing because it allows you to know that you have set up your operation appropriately and are in compliance with your state requirements.
Getting Started Support Options
You may be wondering where to get information and support in setting up your mortgage brokerage business? You have a few options:
GO IT ALONE
If you have previously had your own mortgage brokerage business, you may not need much help in setting up your business and feel comfortable going through the process on your own. You may want to research your vendors and wholesale lenders and follow the steps we’ve previously listed.
PHONE A FRIEND
If you don’t want to go it alone, perhaps you have an industry friend who you can share the responsibilities with. You could create a checklist of what needs to be researched and completed and break up the jobs and tasks at hand.
INDUSTRY RESOURCES
Organizations like NAMB, the National Association of Mortgage Professionals and AIME, the Association of Independent Mortgage Experts, and The Mortgage List provide resources to help mortgage brokers get started.
FRANCHISING
Recent franchising opportunities as part of the Motto Mortgage network provide the resources, help and support to mortgage brokers who want the benefits of being a mortgage broker and owning their own business, but do not want to go it alone as a mortgage broker. Franchising gives the benefits of being in business for yourself, but not by yourself.
Benefits to Being a Mortgage Broker
There may be many benefits to owning your own mortgage brokerage. One of the biggest benefits for originators who are deciding to own their own mortgage brokerage may be creating a legacy plan and owning their own business instead of working for someone else. The ability to walk into your own business and do what you want, when you want may be a very powerful advantage. Additional benefits may include:
- Creating a Legacy
- Building Your Own Business Instead of Someone Else’s
- Having More Control
- Increased Program Options
- Better Pricing
- Having a Team of Wholesalers Who Work with YOU and FOR YOU!
If you are at a point in your career where you want to own your own business, becoming a mortgage broker is a viable opportunity. According to Inc magazine, a new report from the Global Entrepreneurship Monitor (GEM), finds that 14 percent of Americans are starting or running new businesses. That’s a record high! The mortgage broker business model gives originators the opportunity to own their own business and provide consumers with a range of loan program options by working with wholesale lenders who offer choices in loan programs.
Published on September 27, 2019
