Help Me Solve a Mortgage Problem

I remember it like it was yesterday: my first December in real estate.  I’d been working very hard and my business was finally starting to take off.  I had four closings scheduled for the month, and believe me, I needed the money.  After a lean six months in a new career, we were going to have a normal Christmas again, and I was thrilled.  Don’t get me wrong — I’m not materialistic and my family has cheerfully endured good times and bad, but let’s face it, more is better than less.

So we were getting excited, planning on replenishing our empty bank account and holding our breaths.  Then it happened… my first closing fell through at the closing table.  Then the second one.  A third one almost fell apart but I was able to work out a solution by holding my commission check in escrow as security for a 30-day promissory note for my buyer, who had family that could come through.

Why did all these deals fall through?  Because the mortgage company I was using threw last-second changes at my clients making it impossible for them to close.   I’m sure many of you reading have had similar experiences.  Well, I determined that I would never allow that to happen again.

I looked into opening my own net branch with a national lender.  Eventually I passed on that idea.  I talked with dozens of lenders and tried a number of relationships.  Invariably, the lender promised the moon but delivered something far short, leaving me searching for a better solution.  When my team grew to the point we had to start our own brokerage, I began looking for a mortgage partner, so we could open our own mortgage company.

Finally, I found the right partner and became a two-thirds owner in our own mortgage company.  Then I noticed that our company began having the very problems I was trying to solve, so after 15 months, I closed our mortgage company.

Next, I interviewed several other mortgage companies and eventually put two of them in our 8,000 square foot brokerage.  Instead of owning a piece of the companies, I did “affiliated business arrangements” (ABAs) with them.  (For the uninitiated, an ABA is a way that a real estate company can participate in the revenue of an affiliated mortgage company without running afoul of RESPA.)

That experiment has been the best solution so far.  We collected $7,000 a month in rent and marketing fees with no downside, while our two mortgage partners did a combined 45% of our mortgage business.  But here’s my problem.  As I write this, our company is transitioning toward a virtual real estate model and is already opening virtual offices nationally.  At the end of this month, my ABA contracts will end and I will begin looking for a smaller facility more in keeping with our new virtual model.

So here’s my problem:  My network has now grown to over 14,000 agents nationally, and I want to offer a solution to all of them.  I’ve spoken to several large companies, one of whom wanted to make all our agents loan officers.  (I thought to myself, that’s all we need — more continuing education and legal and compliance hoops to jump through! It’s hard enough to motivate agents to do real estate, let alone getting them to learn mortgages too!)  And then it hit me… what if we could simply cut out the source of most of the problems?

What if we could eliminate the loan originator? (You know, the guy that never returns your phone calls because he’s out marketing other agents trying to drum up their business while he drops balls on the business you already gave him.  Yeah, that guy!)  What if we allowed our clients to deal directly with a senior processor in a lender’s underwriting department?  What if we could eliminate about 40-50% of the total costs in a mortgage (the LO’s slice of the pie) and allow our clients to deal directly with the lender, while enjoying the best possible rate, simply by cutting out the middleman?

Tomorrow, I’ll be traveling to Atlanta to meet with the President of a national lender.  Hopefully, it will be a productive day.  So I’m asking you to help me solve this problem.  Give me some feedback.  What would you think of providing your clients with an application platform and allowing them to deal directly with the lender, enjoying the best in rate and fees?  What would you think of eliminating all the double-talk and blame-shifting that typically goes into a loan originator relationship?

I realize that this is a little “out of the box” but the current solution certainly has its problems and there has to be a better way.  I welcome your input and feedback.  Surely, I can’t be the only agent or broker out there having this same frustration.  Take a few minutes and talk to me.   Thank you in advance for your comments.

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