[PULSE] The necessary evolution of the modern mortgage originator
June 18, 2020
If coronavirus has taught us anything it’s that things change fast in this world and we’re not always the ones sitting in the driver’s seat.
The way our industry has dealt with COVID-19 has been exemplary, in my opinion. Having to send all of our people away to work from home one day and then having the Feddrop rates to the floor the next was a stress test like we’ve never seen before.
But we did it. Some raised their rates a bit in early April just to give their teams some relief from the crushing loan volume that hit us, but together we did it. When it’s all said and done, this may yet be one of the best spring home-buying seasons we’ve seen in a long time. A lot of things still have to line up to make that happen, but it could happen.
It’s very gratifying to live through a challenging time. I know it’s not over yet, but I can’t help but look at my team at SRE Mortgage Alliance Inc. with great pride for rising to the occasion and getting business done. Fast change hits like a cyclone and those left standing when the dust settles have every right to be proud of themselves. But there is another kind of change that is much harder to weather.
Slow change has been the downfall of countless enterprises throughout our nation’s history. There are lenders operating today, even some who performed very well during the early days of COVID-19, who are at risk of being cooked. Even now the temperature is rising.
The slow change that will bring big change to real estate
Many times, a change occurs that is so disruptive that the world never goes back to the way it was before. We’re seeing such a change in the real estate industry today, but it began long before COVID-19.
The way the industry has been managing the real estate sales and financing process is changing and consumers like it. Having a single expert to rely on throughout the entire transaction is very appealing to consumers.
For some time now, I’ve been watching real estate companies become mortgage bankers. Lately, I’ve started to see more independent mortgage banks and mortgage servicers seeking access to multi-listing services and other early indications of prepayment.
The rise of the one-stop shop is changing the way consumers search for, buy and finance new homes. And consumers are embracing it.
Only the nation’s largest firms have been able to consolidate services in this manner thus far and it has taken them the last few years to accomplish it. It remains difficult for mortgage brokers or smaller real estate sales brokers to accomplish. But that is now changing, too.
There is coming a new way for these smaller businesses to become the one-stop-shop that today’s consumers want as partners. It is causing many to think about the real estate business from an entirely new perspective.
It’s the kind of slow change that will catch many by surprise. Those that respond appropriately will embrace a new paradigm that will result in changes that will leave the world very different in their wake.
Companies that don’t anticipate and respond to this new paradigm will be left behind.
Defining the Real Property Advisor
So, what exactly is this change that I see coming to our industry?
The real estate professional of the future will look very different from the ones of the past. Tomorrow’s consumer real estate partner will offer everything they’ve been asking for from a single point of contact.
The support that real estate agents offer today, the market knowledge that real estate brokers bring, the home financing that our traditional mortgage banks and community-based lenders have offered – all of this will now come from beneath one roof.
The only thing they may not bring to the table, at least in the early days, is the capital structure required to own a mortgage bank. They will start out as mortgage brokers and will seek out a wholesale lending partner.
We call these new industry professionals RPAs, which stands for Real Property Advisors. We have every reason to believe that they represent the future of our industry.
An RPA will be a licensed real estate agent or broker who can guide the home buyer through the process of finding and purchasing a new home. But, instead of handing that consumer off to someone else to get the deal financed, the RPA will handle that as well.
In addition, the RPA will be a trained mortgage broker, registered in the NMLS. That will give them the power to find whatever financing their homeowner needs to complete the transaction.
Today, there aren’t that many industry professionals that can offer everything the consumer needs, but that will change. It will change because it must.
Why Mortgage Brokers Should Consider RPA
Even though real estate financing is required for the vast majority of home purchases today, the mortgage broker is almost never the first step in the new home buyer’s journey. There are industry drivers today that are pushing real estate agents into the mortgage loan origination business. If they continue to face resistance to traditional real estate commission structures, we’ll see a lot more of this.
The writing on the wall clearly states that mortgage brokers are in danger of being pushed out of the equation entirely. To survive and thrive in the future, mortgage brokers must begin to think outside of the box.
What if the broker was also licensed to show real estate? What if mortgage originators had all of the industry data that real estate salespeople currently have and could harvest new leads without having to depend upon business referral partners?
This is the promise of the RPA designation.
It’s important for mortgage brokers to begin working on this transition now because real estate brokers are already moving in this direction and have been for some time. Consumers want a single point of contact to work through the stressful real estate transaction. The real estate agent already has the trust of their clients.
Why should the real estate company continue to hand their valuable prospects off to someone else for home financing if they don’t have to? Pressure on their existing commission structure is driving them deeper into the finance business.
If the mortgage originator takes this step, it will mean more revenue for them on each transaction and the ability to remain in touch with the borrower for the life of the loan, getting the first opportunity to serve that borrower for their next transaction or loan.
Change is definitely coming to our industry and competition for the consumer relationship has been heating up for some time. It’s time for more loan originators to evolve.
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