Mortgage pros on the steps needed to continue gaining traction

Amid early signs that the US mortgage market is poised for a recovery in 2025, a key question looking ahead will be whether brokers can prise business away from the banking and retail spaces.

Competition for deals is sure to be fierce, with a potential glut of refinance business up for grabs and a sharp fall in mortgage rates over the summer piquing the interest of many hopeful buyers.

While the reputation of the broker space was badly burnt by the fallout from the global financial meltdown in 2007-08, it’s bounced back since – not least thanks to its performance during the COVID-19 pandemic, when brokers helped clients navigate one of the most competitive and hotly-contested markets in recent memory.

In the aftermath of the subprime mortgage crisis, negative perceptions of brokers were a “big stumbling block” to growing the profession’s market share, according to Harish Tejwani (pictured, top left).

The entrepreneur, who helms ARIVE – a mortgage broker platform provider – said those preconceptions are rapidly changing, with efforts to get the word out about brokers helping no end. “Consumer education is very important,” Tejwani told Mortgage Professional America.

When it comes to tackling negative views of the profession, “that’s where organizations like AIME [the Association of Independent Mortgage Experts] and some other great lenders have created this awareness that brokers are best for consumers,” he said.

Mortgage rates trended down this week, with the 30-year fixed-rate mortgage (FRM) dipping to its lowest level in two years, according to Freddie Mac’s latest Primary Mortgage Market Survey (PMMS).https://t.co/X29SkuulKH— Mortgage Professional America Magazine (@MPAMagazineUS) September 28, 2024

Highlighting potential savings a crucial strategy for mortgage brokers

Advances on the technology front have also boosted the effectiveness of the space. “The other challenge in the broker world was that there was no seamless software, and that’s where we come in,” Tejwani said. “Brokers were always kind of held back because retail has pretty good software platforms to do loans – and that does not exist in the broker channel. That’s the gap ARIVE is fitting.”

Most Lenders are bullish about the future of the broker space. The wholesale lending giant believes brokers’ share of the market will jump to 33% by 2026 – fueled in part by a growing belief, its executive vice president Alex Elezaj told Mortgage Professional America last year, that brokers can help clients save much more than in the retail arena.

 Koti Avula, broker-owner at APS Mortgage in Texas, believes it’s important for brokers to clearly communicate the potential for borrowers to get the best deal by working with them, rather than choosing a retail option. “You give the customers awareness of how the broker will help in terms of saving more money compared to retail,” he told MPA. “It’s an eye-opener for everybody.

“We’re explaining it to our customer base… and that is what’s going through to their friends and family. That’s how it is spreading.”

Avula also highlighted improving perceptions of the broker space within the US’s major media outlets as a factor that could help drive growth of brokers’ market share in the years ahead.

Education critical in growing brokers’ market share

Brokers can’t afford to rest on their laurels, according to MS Lending broker/owner Michelle Dugan (pictured, top right). She told MPA that education should remain at the forefront of brokers’ priorities – “whether it’s educating the borrowers or whether it’s educating retail LOs to come over to the brokerage side of things,” she said.

“To me, every piece of the mortgage industry, you can barrel it all back down to education and I think it’s just spreading the message – getting it out there.”

Progress is being made in promoting the value of using a broker, Dugan argued, but there remain plenty of borrowers who are still in the dark about the difference between a broker, banker, and loan officer.

She also emphasized the importance of teaching clients about the potential savings on offer by using a broker, as well as highlighting to mortgage professionals on the retail side the benefits of a switch to the broker space. “Between the combination of borrowers getting educating and then pulling over more and more of these retail loan officers and bankers, I think we’re going to [increase market share],” she said.

By Fergal McAlinden01 Oct 2024