The Future Of Mortgage Lending

Further reading, links and information.


The Future of Wholesale and Correspondent Lending
(started in 2009 through changes we've faced)





Mortgage Brokers provide significant credits and benefits to consumers

Understanding Depository vs. Non-Depository Residential Mortgage Origination


The loan origination channels available to consumers in the primary mortgage market are one of the most misunderstood variables when buying or refinancing a home in the Unites States, yet overall it is quite simple. Residential loans (Conventional and Government) are originated in the Primary Market and sold in the Secondary Market consisting of both public and private investors who buy mortgage notes. These investors are primarily Fannie Mae, Freddie Mac, and Ginnie Mae. Lenders then replenish cash reserves so they can originate more loans.

 The Consumer Financial Protection Bureau (CFPB) has opened its doors to better learn and understand our industry and currently divides attention to understand bank and non-bank mortgage service providers.  It’s imperative that we continue to work together toward better education and avoid unintended consequences of some proposed policy that contradicts the overall intention.  The following will lay out why non-depository mortgage origination services (which accounts for about 50% of National volume) are vital to the financial interests of US consumers by leveling the playing field, reducing costs, and avoiding special interests of the “too big to fail” banks.

Important Bullet Points:

  • The terms “Broker” or “Banker” don’t carry meaning under predominately agency-backed residential mortgage services and often misused and misunderstood.  All Mortgage Professionals dealing with consumers are simply “Mortgage Loan Originators” (MLOs) as defined under the Nationwide Mortgage Licensing System (NMLS).   Lenders underwrite to agency or investor requirements and only offer these programs as a result of these agencies and liquidity they provide.  All mortgage providers are essentially “third party” originators to these agencies, regardless if they use a line of credit to get there or not.  At the end of the day, a Fannie Mae 30 year fixed is still a Fannie Mae 30 year fixed.  The difference to the consumer is only in origination quality regarding experience, service, pricing and execution.
  • Subprime Lending and “no doc” loans no longer exist and have not for years.  It is important that we work together to avoid any future programs that are determined to be irresponsible or predatory, but also not pushing excessive regulation and any unintended consequences to strong performing loan programs and responsibly qualified consumers, restricting credit in a slow recovering housing market. 
  • Since 2009, we have the best performing and highest quality of loans originated ever on record.  As stated above, we need to protect good borrowers and potential home buyers from unintended regulatory restraints restricting credit and forcing higher costs by better understanding the changes that have taken place since the subprime melt-down.
  • There has been nearly a 75% reduction in Mortgage Loan Originators since 2005.  It’s important that we understand that most Mortgage Originators that behaved unprofessionally, fraudulently, or dishonestly, are simply no longer in the industry (or now easily exposed).  The majority left are hard-working, long-term, career-minded individuals that love this industry and are committed to the consumers they serve.  It’s also important to understand that no Mortgage Broker, Banker, or any title of an MLO one can come up with created these subprime or toxic mortgage programs we faced prior to the meltdown.
  • A Mortgage Loan Originator cannot “steer” a borrower toward a certain interest rate or product for financial gain or additional “kick-backs” i.e. “YSP”, etc.  All Mortgage Loan Originators on all channels must comply with new compensation and anti-steering rules.  Mortgage Loan Originators cannot be paid more or control compensation based off the terms or conditions of the loan, on any origination channel or platform.
  • The SAFE Act (Secure and Fair Enforcement for Mortgage Licensing Act) was established in 2008 which requires state-licensed MLOs to pass a written qualified test, to complete pre-licensure education courses, and to take annual continuing education courses. The SAFE Act also requires all MLOs to submit fingerprints to the Nationwide Mortgage Licensing System (NMLS) for submission to the FBI for a criminal background check; and state-licensed MLOs to provide authorization for NMLS to obtain an independent credit report.  Federally Chartered Banks and many Depository-employed Mortgage Loan Originators are exempt from many of these requirements.

  • All begins with the Mortgage Loan Originator (MLO) which is most important to the consumer.  The process may be identical overall, but the beauty in competition and choice is that it allows consumers to compare experience, execution, credentials, and pricing.  Competition is vital for a healthy financial market and affordable housing.

A few of the many benefits to consumers in using a Licensed Mortgage Loan Originator (MLO) under the Non-Depository Channel (Correspondent and Wholesale Lending)

  • Most are locally owned and operated, dedicated to their local communities.  You will find that most Non-Depository lenders and Brokers work by reputation and referral in their local communities from clients, colleagues, and local businesses.  Originators under this channel are also more individually responsible as it pertains to ethical behavior and integrity, unable to hide behind big corporate drapes or pass their clients or issues off on operational staff, such as can occur with the big banks and other depositories.
  • Many would argue more products and more competitive pricing.  With the ability for most Non-Depository Mortgage Loan Originators to compare different products and lenders there is a higher probability of securing a better loan with more favorable terms for the consumer.  In addition, most small business providers have the ability to better control overhead, resulting in additional savings passed onto the consumers they serve through interest rate and net origination fees.
  • One focus and one goal.  Most Non-Depository Mortgage Providers are dedicated to mortgage-related services only and not in the business of up-selling or offering other products and services to satisfy corporate special interests such as common with the big banks.  This can interfere with the Originator putting their client’s interests first during a significantly demanding residential mortgage process.  As a result of this and other demands these banks face, it is argued that a smoother and more enjoyable process with faster closing has a higher probability under the Non-Depository origination channels.
  • Many would argue more qualified Mortgage Loan Originators and greater accountability.  With a greater barrier to entry regarding licensing and education requirements, it is common that the most qualified and experienced career-based Mortgage Professionals work under the Non-Depository channels.  With greater access to product they can ultimately see the benefit to their employer, the consumer, by working under this channel.  Please also see the attached proposal from Regulators in Oregon State to expand licensing requirements for a more level playing field: ”Just since 2009, the Division of Finance and Corporate Securities received 719 complaints involving a financial institution. 411 of those complaints related to mortgage lending, servicing, and foreclosure practices. Out of these 411 mortgage-related complaints, 373 – or 91% – involved a federally-chartered institution.”

We are in a new industry facing many changes, most of which have already occurred.  This requires us to adapt and work together for fair and accurate policy going forward to avoid unintended consequences.  Communication and education will ensure that we don’t prohibit consumers from competition and choice by misunderstanding the primary mortgage market.  We must fight against bank monopolies and special interests and support policy that improves our housing market and the interests of the consumers we serve. 

We support all forms of responsible lending, but want to put emphasis on the importance and relevance of Non-Depositories