If you’re already a successful loan officer working for an independent mortgage bank, retail bank, credit union, etc., making the leap to getting your own brokerage license can be both challenging and very rewarding.
If you’re not already in the industry but want to be, you’ll first need to know about the different job titles that exist. This is important, as what most people think of as a mortgage broker is actually a licensed mortgage loan originator. They may work for a bank, a mortgage company or with a licensed mortgage brokerage.
The distinction is that a bank, mortgage bank, credit union or other direct mortgage lender is typically financing a loan in its own name, even if it closes and is later sold. A mortgage broker does not finance home loans; they arrange them for closing with a third-party lender.
If you are looking to enter the industry as part of a larger financial institution, another article focuses on becoming a loan officer, and it’ll be a better place to start.
Those looking to start their own business by obtaining an independent mortgage broker’s license, read on.
Getting Licensed as a Mortgage Broker
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As a licensed originator, you already know how things have changed. You’ve been through the process of taking continuing education classes, passed the tests, been fingerprinted, paid your fees and, ultimately, been granted the privilege of helping your clients obtain their needed mortgage financing.
Now, you’ll get to go through an even more arduous process to obtain a license to conduct business on your own. From the government’s perspective, you have more responsibility in this role, and thus, the application process entails more.
To get started, first know that a mortgage broker’s license is state-issued. This means that the process can and will vary from one state to another. You can find your state’s requirements here.
Each state will have a governmental agency charged with overseeing the process. For example, in New York, the licensing process is managed by the Department of Financial Services.
Start by completing and submitting an application for review and approval. Again, using the state of New York as an example, approved applicants then need to submit a surety bond and proof of a line of credit. Then there isa conferral meeting, after which, if all requirements have been met (background searches, a credit report, fingerprinting, etc.), a license certificate is then issued.
What’s the next step in the journey to becoming a mortgage broker?
Congratulations! You’re a licensed mortgage broker! As you may have guessed, having a license is just the beginning. You’re a broker now, which means you’re a middleman. You need clients, which means sourcing leads, and just as importantly, sourcing wholesale lenders.
You probably already have a book of clients, and if you have already worked in a mortgage bank that can broker out or in a true broker shop, you’ll at least know some lender reps that can help you get an application in for approval on your own. Just be prepared, as this typically entails a whole new approval process.
Banks, especially the large money center banks, have pretty stringent standards regarding who they will approve to submit loans. They remember all too well the losses from past credit crises. It wasn’t fair as a whole and was certainly very unfair for many of the honest, hard-working brokers that existed, but much of the blame for past problems was placed on brokers. The bar remains high as a result.
Partnering with one lender is not nearly enough to run a successful brokerage. The whole idea of being a broker is to offer choices to your clients and prospects. Otherwise, you may as well work at a bank that only offers its own products. Whether it’s pricing, underwriting, restrictions on marketing to your own clients or the mix of available loan products, not every lender is going to best suit your needs and those of your clients.
Diversity Is Key
Even if you specialize in certain loan types or markets, having what your clients need is key to success and also key to not being pigeonholed by real estate agents as “the VA guy” or worse, the “no jumbo loans guy.” It’s great to have a specialty; it’s even better to have the skills to be a master of many.
If a prospect is interested in a niche loan that you are not yet comfortable originating yourself, you can always refer that client to someone who specializes in that loan scenario. Though it may seem unwise to pass off a business transaction, offering a potential borrower a better experience with someone else can help you win their trust and future referrals. Borrowers are more likely to respect a broker who admits when they are not the best-equipped to handle a specific loan, as opposed to a broker who presses forward with the transaction and risks a poor borrower experience due to lack of knowledge.
It will take time to amass a book of lenders to work with, but it gets easier. Once you’re approved by some, others will view you more favorably, especially if you are writing a fair amount of new business.
Concentrate on what’s best for you and your usual customers first, then expand from there. It’s a wonderful feeling to know that, as your own boss, you are free to pursue any lender relationships you want without someone in an ivory tower making the calls while not understanding the needs.
If you want to write FHA, VA and USDA loans, go for it. If you want to have super-jumbo loans for high-net-worth borrowers, do it. If you want to work with smaller independent builders and need construction loan financing, have at it.
There’s a whole world of possibilities out there – from lenders that often have the best rates, to lenders with the lowest closing costs, to lenders that might be a little more flexible on the lowest acceptable credit scores, the best loan programs, etc. Just be careful not to get so diversified that you lose control and familiarity with each lender and their programs.
It’s just as important to know what really flies with each lender vs. knowing only the generic guidelines. Plus, the more business you do with fewer lenders, the more valuable you become to them.
You know from working for others that there’s an important economy of scale applicable to almost everything you will do from here on out. That means not being able to justify a nice office unless gross income supports it. Same for having a great processor, office manager, equipment and other loan officer recruits to help keep the office pipeline full.
The boss life isn’t for everyone. You’ll find that you’ll be so busy running things and managing those lender and real estate agent relationships, regulatory responsibilities and financial filings that you’re only likely to survive if you have an additional salesforce bringing in the loans.
Managing all these people is a job unto itself. Before taking the leap, be sure you are confident in your abilities. If you’ve risen to sales, branch or regional manager with your current company, you already know and have the right kind of experience. Making a decision from that point is a lot easier than if you’re still relatively new to the business and haven’t seen a downturn yet.
All in all, there’s undoubtedly a risk to becoming a mortgage broker, but a very high potential reward as well, and isn’t that the way it usually works with anything worthwhile?
Go from Mortgage Broker to Top Producer with a Marketing Automation Engine
Lastly, if you’re going to explore or have already decided to make a brokering career move, start your new business off right from by taking advantage of today’s technology in every way that you can. You will need a modern loan origination system (LOS) just to get rolling. Then, integrating your LOS with a top-notch customer relationship management (CRM) program can help help you get the word out to friends, clients, agents and other referral partners.
The most advanced mortgage-specific CRM platforms will offer end-to-end automation that allows brokers to communicate with their entire contact database through multiple channels without having to lift a finger. Better yet, choose a marketing tool with built-in, customizable templates and video-sharing capabilities to help you develop and launch your social media brand and fuel it with content that engages your audience.
To experience a world-class mortgage CRM system that’ll help get you up and running and then keep your database management and marketing in great shape, set up a demo with Surefire℠ CRM and Mortgage Marketing Engine by Black Knight today.