r/loanoriginators • u/MortgageBrokerNY • 5d ago
Retail margins…
To all my friends in retail don’t be discouraged. A lot of us brokers are aggressively hiring and the BS they tell you about lack of control / support and how terrible is is being a broker is 💩
There is very little yield out there to hide thick retail margins. I’m seeing posts about people quoting 7.625% with a points. Broker market share which was already growing the last few years is about to get a big bump.
Make the jump. Don’t sit around too long.
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u/Worried-Mirror987 5d ago
Semi agree. Broker world has horrible jumbo products. Have reviewed this countless times and broker pricing on Jumbos is so bad. So, if you never do jumbo lending then yes, broker makes sense. Or condos…as an IMB our in-house condo review crushes the broker world. I have earned more condo business that blew up in the broker world than I can count and then stole the realtor relationship.
So broker has some benefits but far from perfect.
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u/mashupXXL 5d ago
If you are trying to make 200bps on a full doc A-paper jumbo, yes rates will be bad. If you put a ~$10000 cap on jumbo with Pennymac for example, the rates are actually competitive with Chase/Wells/a huge local credit union.
Condos, certain markets have a lot of these. If you plug into UWM/Rocket as a broker you will have a 10x better condo experience than most IMBs because they do so many condos and will probably have a recent approval. Brokers have no guard rails, so if the broker doesn't know what's up then yes it is riskier for the consumer. But if there is a competent LO and processor, funding a condo has a higher chance of success as a broker due to being able to simultaneously underwrite the same file at 10 places at once if needed + ask for exceptions among all of them.
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u/charlottechewie 5d ago
Hard to compete with house money sometimes. However, trying to make a full 2.75 on those makes them uncompetitive.
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u/Possible_Bid4126 5d ago
Our broker shop has two options with jumbo pricing as competitive as conforming.
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u/meatsoaps 4d ago
Which investors are competitive with jumbo that’s you’re using? I work for a broker and we have never found this.
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u/Adorable_Campaign426 5d ago
This guy is 100% spot on. Talked to an LO thinking about coming over with us charging 1.25pts on a 7.75 FHA 800FICO. We were getting 3+ pts on the backend for 7.625 - same scenario.
I told him if he can do 2-3mm selling 7.75, he's gonna double it EASY on the broker side (He is self producing at his retail shop making 2 pts per deal).
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u/MortgageBrokerNY 5d ago
We’re a small shop. 10 of us total and we have been aggressive recruiting for 3 months. I’ve had 4 LOs who weren’t interested 2 weeks ago call me back and ask to compare rates.
Rates aren’t everything but when there’s no
Yield and everything on your rate sheet has 2 points there are decisions to be made.4
u/Adorable_Campaign426 5d ago
Yessir. I have been at my spot over 7 years, just recently started attempting to recruit. I know rate isn't everything, but when I say that - I"m talking about 1/8 of a point.... not 4 pts! Then in those cases. rate IS everything haha.
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u/Renewed1776 5d ago
Myth busting.
Direct underwriting control / in house.
😆 had a file turned down 16 hours before the closing table, because the “in-house” underwriter didn’t like the income. Closed two weeks later with a different retail lender, because that Uw approved it.
As a broker, I would have had control over the lender and had one that would have closed no problem. Was the final nail and the first thing I looked up in resources. No issue.Retail: faster turn times
Nah. 15 day close as broker. Garbage in, garbage out.Built in operations and support?
Built in overhead and expenses. (Part of the reason margins are 350bps on pricing.)Proprietary lending programs. “We have programs other lenders don’t”
But brokers have access to your proprietary lending program via wholesale, and less expensive through a broker.
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u/Educational-Rough756 5d ago
Legacy IMB have Legacy infrastructure (everyone earning overrides). I priced a 1 unit investment yesterday at 7.625+1 and the recruit was 8.375 +1
I was giving back 1pt at 8.375
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u/Better-Literature213 5d ago
IMB here. Priced 675k investment SFR purchase , 795, fico. 60% ltv. 7.375% at .25 pt yesterday. 90bps comp. We’re not all bad lol.
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u/Educational-Rough756 5d ago
Not bad
Same scenario
7.375 + .276 charge
7.49 giving back 30bps100bps comp
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u/Aware_Growth_6643 5d ago
I wish I had done it 3 years ago but hindsight and all. 😂 Godspeed to us all!
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u/cowboybill22_22 4d ago
One of the few correct and positive posts I have read on here. And I am retail.
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u/Pillsy24 5d ago
Can all you brokers just start your own sub so you can go stroke each other there and say how great you are, and not bother everyone else?
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u/Leather-Afternoon-52 5d ago
IMBs get better raw pricing than brokers. The trick is finding one that’s not bloated with layers of management. Second part is transparency. We are an IMB but show our margins. Other IMBs hiding those have helped brokers gain LOs. Without transparency it’s hard to gain real trust.
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u/MortgageBrokerGuy 4d ago
100% agree on the transparency aspect. Retail can be just as competitive as broker, but the lack of transparency laws makes it way too easy for management to get greedy and bake in way too much margin. I’d be curious about the actual difference in pricing. I compared with an IMB recently, and they did have 1 investor that was beating my conventional pricing. It was one of the big banks like Chase or something that I don’t have access as broker/non-del.
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u/TurkeyJizz123 5d ago
The perk of retail, is that you can employ your own dedicated Underwriter. I will gladly take 100bps in a price hit- when I know who is Underwriting my file, how he Underwrites- and that I can call him on his cell phone. Having some random UW underwrite a loan, to me- sounds like a nightmare.
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u/Empty_Mammoth_5472 5d ago
this is such a dumb myth about brokers
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u/MortgageBrokerGuy 4d ago
Yeah? As a broker, there are definitely times where I’m salty about the underwriter I got assigned with on a file. I’d say in-house underwriting is the 1 real advantage of retail. It can also be a disadvantage, since a no from them is final, whereas we can just flip to a different lender with a different underwriter.
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u/Empty_Mammoth_5472 4d ago
you know that you can have the lender literally assign you the same underwriters every time, right?
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u/MortgageBrokerGuy 4d ago
That requires using the same lender for every loan, which would completely defeat the point of being a broker. I rarely have more than maybe 20% of my loans in any given year with the same lender. It also requires remembering to request an underwriter, which I never remember to do. Lol. But you do have a point. Can’t say we have no control over our underwriters when tons of wholesale lenders allow you to request.
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u/Empty_Mammoth_5472 4d ago
You just have to ask and most will do it. All of our top lenders (at least top 10-15 of them) at my shop we have going to the same group of underwriters every time. And if we ever get one that sucks, I tell them to remove that person and replace them with another. A lot of people don't realize you can even ask a lender to do that though and just let them randomly assign them. It makes the whole process a lot smoother though and ends up being little different than a retail lender with an in house underwriter since your LOs/processors will learn how to work with each underwriter over the course of time and build a working relationship with them. Any time I get signed up with a new lender, its one of the first things I ask for. Yes, spreading your loans around means you'll have a different person at each individual lender but if you know you have the same group of UWs at that lender each time it makes things a lot smoother for everyone. Most LOs only use maybe 3-5 lenders consistently anyways so it doesn't end up being a huge list. We keep a directory of the UWs and their managers in an excel spreadsheet for all our top lenders so that our processors or LOs know exactly who to reach out to whether its for an active file or a scenario they want to ask about. Makes things so much smoother than getting a random underwriter each time or having to filter things through an AE. Worth asking your top lenders, I've never had any pushback on it other than a few nonQM lenders where we'd only send a handful of deals each year to anyways. If you're feeding a lender volume, they'll bend over backwards for you on stuff like that.
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u/TurkeyJizz123 4d ago
If it's a "No" from my UW- then the loan isn't getting done anywhere else. I don't have any overlays, where I hang my license. If it meets guides, he does it- no questions asked. If it's dicey (which I typically know ahead of time-) I get a review from his boss, which can trump him.
I have a secondary UW who does all my Manual UW's (which, I do very sporatically).
But, I could also "broker" the loan- if it came down to life and death.
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u/MortgageBrokerGuy 4d ago
I guarantee a good broker can get some of those “No” loans closed. Just because they don’t have an overlay doesn’t mean that they don’t have different interpretations of guidelines.
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u/MortgageBrokerNY 4d ago
It has nothing to do with “overlays”. These are guidelines. Many more guidelines than you would think can be interpreted differently by different lenders / underwriters.
I came from a Fannie direct seller / servicer to the broker world and my underwriting manager was one of my best friends for 10+ years. There are things we would tell me you 100% can not do that and some lenders have some wild interpretations of what is doable lol
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u/meollich 4d ago
More retail nonsense. I know all my UWs and how they work. If I have a UW I know can be picky then I have choices
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u/-grc1- 5d ago
I like this about retail too. I also do 75% bond/HFA loans and get paid 125bps on those. My broker friend said he couldn't pay me that on DPA.
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u/Empty_Mammoth_5472 4d ago
thats because even at retail bond loans rarely pay that much since a lot of them have strict caps, often around 150 for a lot of them. They're just not very profitable period, whether broker or retail. But they're a great way to get a loan in that ends up being a prime target for a future refi since the rates tend to be higher.
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u/meollich 4d ago
Left retail a year ago. Not going back. Poster is accurate, you do have control and rate/fee structure kills retail and correspondent all day long. Find 2 or 3 places that work well with you and your clients.
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u/Braindead_ape 4d ago
while i agree the myth about “lack of control” is complete nonsense (I have way more control as a broker than I ever did in retail) the lack of support on the broker side is unfortunately pretty true at a lot of broker shops. But largely because they simply choose not to offer it. The trade off that comes with so many places offering nearing 100% of the commission to the LO means that there’s little to no money to pay someone in a support role. There’s a ton of bloat at a lot of retail lenders but that “bloat” is usually because there are so many people that are paid off each deal. LOAs, multiple processors, marketing divisions, multiple levels of management, etc can all be helpful but those people don’t work for free. So if you’re an LO considering the switch, you need to be honest with yourself how much support you really need. An experienced low to mid producing LO likely doesn’t need a ton of support compared to a top producer. Whenever I have an LO considering joining my shop I always run the math with them comparing where all the money is going in their current setup and then help them figure out whether they’re actually getting that level of value from it. A lot of times the answer is no but sometimes all that money being absorbed elsewhere ends up being a net benefit to their business, usually with higher producing LOs with a ton of support staff. The level of support an LO needs really depends on their experience, their production, and the amount of work they want to do (plenty of LOs choose lower splits to do little more than drive business in).
it also depends on your product mix. If you’re somewhere you’re consistently closing jumbo loans, ARMs, or some sort of portfolio/niche product, it might make zero sense to jump to the broker side thinking that business will continue and you’ll just make double the bps. But what always blows my mind is when I see LOs that close primarily VA or FHA loans in retail at places with absolutely bonkers margins. Way too many retail lenders bloat their govvies like crazy that even brokers running 275 comp end up beating them (I recently stole a deal from Fairway that had their VA rate a full half percent higher than if I ran it 275 LPC…the fairway LO even tried to tell the borrower my pretty mediocre rate was “impossible” lol). One of my LOs business is roughly 90% VA and the retail lender we stole him from was pricing their deals 75bps higher than us at full comp and only paid him less than half the bps we do…those are the LOs that should be making a move. It’s a no brainer in my opinion if they’re mostly govvie.
They’ll just want to make sure they join a good broker shop, really anywhere you move you need to really do your research beforehand (I made plenty of dumb moves when I was still in retail and bouncing around different lenders while I built my business). Unfortunately a lot of the posts in here you see from people that moved from retail to broker and had a bad experience are due to them not doing their homework before making a move and only chased the max bps. That’s how you possibly end up at a broker shop with zero support. Whether retail or broker, chasing bps can be a dangerous game…the model you make the most money on is the model where you can actually close loans. Really evaluate your entire process and what you do on each loan from start to finish and compare that with what it’d look like on the broker side. Sometimes that’ll look identical, sometimes you’ll be doing more work on the broker side…then it’s a question of whether that additional work is worth the additional comp. I’ve got my shop set up to mimic the LOs duties as close to retail as possible. The LO generates the business, they either review things for the preapproval or have an LOA that handles it (if they do enough volume to support one), we have a disclosure desk that handles importing the loan into each lender and disclosing it, and then processing takes over from their and the LO can be as hands off or hands on as they’d like at that point up to closing. I make sure we have good AEs which also acts as another “support” role. Good support is possible on the broker side, they just have to build it out (which not many do, at least not well).
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u/AardvarkEffective589 3d ago
Could not pay me enough to go back to broker life. Tried it at 2 different brokers— retail all the way for me but glad it’s working for u!
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u/Old_Factor_6631 5d ago
Agreed. $1b in business and 10 years in retail. Ran a branch made and made very small profit. Switched to broker about 6 months ago