I’ve spent years asking top mortgage lending execs this question: who’s your primary customer, loan officers or consumers? Most answer LOs because most industry market share is still LO-driven. But let’s go deeper to see if this answer holds up for execs and LOs over full market cycles. And let’s frame it in the context of today’s top wholesaler asking LOs to limit the options they have for consumer clients.

Note: other than the headline, I’m writing this without company names so we can see how these mortgage channel themes hold up years from now. As the Bon Jovi gospel says: “It’s all the same, only the names will change.”  

Who’s the customer in America’s mortgage market: LOs or consumers?

In the end, the consumer is the customer. Period. Without them, America’s mortgage industry doesn’t fund 7.8 million units in 2019, 12 million units 2020, and 9.2 million units this year (per MBA). 

And in an industry where most of the market share is driven by consumer-facing LOs, the LOs are in control. 

Or are they? 

Today’s top U.S. wholesaler (which has 33.5% market share of loans originated by brokers, per IMF), gave America’s brokers an ultimatum to dump two other wholesalers (with 17.8% and 0.5% broker market share, respectively) as partners or “you can’t work with us anymore.”

This ultimatum comes after a few years supporting a narrative that tells broker LOs how certain wholesalers will steal LOs’ clients after the loan is funded. Any LO who’s been around for a minute knows this brawler narrative isn’t black and white. It’s grey for three reasons:

First, wholesale players change over full cycles — today’s top 25 wholesalers are way different than pre-2008. This makes freedom to choose wholesale partners all the more important in a broker LO’s long game.

Second, as we go deeper into this new era of mortgage-only lenders being publicly traded, maximizing shareholder value will ultimately lead to channel diversification, which means all public wholesalers are eventually subject to LO-perceived channel conflict. 

Third, wholesaler promises to LOs aside, servicing transfers are inevitable over full market cycles. So the longer a client is in any given loan, the more likely servicing will transfer away from the wholesaler where the LO funded the deal. 

LOs know these market dynamics mean the responsibility is on them — not their chosen wholesale partners — to retain their clients over full cycles.

Brokers: win the crowd and you will win your freedom

And all you broker LOs know this best because you’ve committed your careers to independence. Your line in the sand isn’t Wholesaler A or Wholesaler B. 

It’s the freedom to choose wholesalers, and the freedom to engage, retain, and place your clients as you see fit.

The Brokers Are Better movement should focus their All In mantra on this consumer-first long game instead of brawling over wholesale partner nuance that doesn’t hold up over full cycles.

That said, I know many brokers respond well to brawling narratives. So my message to you is what Proximo said to Maximus in Gladiator: 

“Win the crowd and you will win your freedom.” 

Cater to the mortgage customer, and wholesalers will cater to you, ensuring your die-hard independence. 

To do this best over the long haul, you need unfettered access to all wholesaler options for price, guidelines, speed, underwriting certainty (especially critical for the purchase market), and comp.

You long-gamers know this, but it’s just a friendly reminder. And for those who weren’t in the game during the last cycle, here’s a one sentence briefing:  

When the pre-2008 boom went bust, brokers were used as “rogue actor” scapegoats by top market share players who killed wholesale divisions to focus on channels they could “control better.”

The takeaway: wholesale players and their promises change, so keep your options open.

Or maybe another takeaway is: agree to onerous terms with a top player now and change later if it becomes too limiting. 

I get you’ve been given a tough choice, and I wish you all nothing but success on your consumer-first endgame. 

The customer endgame for wholesalers  

Now let’s bring this home with our core question addressed to wholesalers: Who’s your primary customer: brokers or consumers?

Die-hard brawlers will answer “consumers” for some of you wholesalers, because it fuels their theory that you’re using them to acquire customers you plan to steal.

However, we know the answer for ALL of you is that “brokers” are your primary customer — and different actions each of you take proves your commitment to brokers, regardless of broker skepticism of multi-channel players.

Broker skepticism is the root of their independence, and drives their “access to all options” value prop. So it’s healthy that brokers have rallied against channel conflict in recent years. But I humbly ask today’s top wholesaler: is it truly necessary to take it this far? 

Until now, you’ve fully proven brokers are your primary customers and you’ve already earned their loyalty. 

Asking brokers to limit their options now compromises their core value prop to consumers. And when your organization diversifies in the future, it’s just a harder message reset. 

I’ll be happy to eat that message publicly if you end up as a pure-breed wholesaler cradle to grave. But shareholder accountability, good old-fashioned public company M&A, and time will tell.

And in the end, the consumer will still be the customer. Period.

This column does not necessarily reflect the opinion of HousingWire’s editorial department and its owners.

To contact the author of this story:
Julian Hebron at [email protected]

To contact the editor responsible for this story:
Sarah Wheeler at [email protected]