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Special Reports
Broker to Banker
Expert: Must Consider Several Issues
By Bonnie Sinnock
LOS ANGELES --There are other complexities to consider besides obtaining a warehouse
line when considering making the move from mortgage broker to mortgage banker, according to executives at one consulting
firm headquartered in the Sherman Oaks section here.
The patchwork of state and local lending laws seen in recent years, higher profile
of disaster-related risk management concerns and evolution of technology are among the other issues that transitioning
mortgage brokers should be aware of, said Bill Beschel and Elsa Martinez, who are principals at WAS (Warehousing
Advisory Services) Inc.
Ms. Martinez said that, in addition, they are that finding compliance, post-closing
and secondary market concerns have become "a large part of what we're doing."
Warehouse lenders are "embracing technology and building platforms that make
the management of the warehouse facility more efficient," said Mr. Beschel.
"You better have the technology to hook into their system. Everybody's really
[working] over the 'Net now," he said. Thus, the warehouse lending business today demands a certain level
of "technical competence," said Mr. Beschel.
Technology also naturally has played a role in mortgage originators' disaster
recovery plans, he said, noting that warehouse line providers have increasingly come to require originators to
have such plans in place because of recent events such as the hurricanes in Florida. He said that, depending on
the needs of the company involved, the technology does not necessarily have to be complex, but most warehouse providers
do require loan originators to have some kind of plan in place for what they will do in terms of keeping their
business going if a disaster strikes.
"If there's a catastrophic system failure you've got to demonstrate"
that there is a way to recover, Mr. Beschel said. He said originators have to be sure that backups of important
electronic files exist in an alternate location of some kind.
Mr. Beschel and Ms. Martinez said that even though becoming a mortgage bank has
become more complex in these ways, is no less popular.
"There is absolutely the desire to transition to being a ... mortgage banker.
It is very much a business plan and a business model for [the] smaller-to-midsized mortgage broker," said
Ms. Martinez in a phone interview.
In addition, a growing number of transitioning companies that obtain lines are
originating in "a multitude of states," she said. Being able to originate and fund across state lines
isn't a necessity when one becomes a mortgage banker and it is not necessarily for everyone, but it can have its
advantages, Mr. Beschel and Ms. Martinez said.
In addition, "a diversified portfolio can be a factor in your favor in the
overall calculus of determining what a particular [loan package] will be priced at," Mr. Beschel said, particularly
given the growing number of studies indicating that, while real estate remains fairly healthy in general, there
may be some geographic areas of the United States in which property appreciation may not be as healthy as it has
been.
There are a number of reasons becoming a mortgage banker has remained attractive
despite its aforementioned technical, legal and risk management challenges, the two executives said.
Ms. Martinez said the "control" the transition gives an originator is
important. "In our view, it's the No. 1" advantage a mortgage banker has, Mr. Beschel said.
Control gives originators the ability to schedule closings. Being able to do this
helps solidify relationships with borrowers. This has been increasingly important in the higher rate, lower refinance
market seen recently, the two WAS executives said. In addition, being able to schedule closings is attractive to
the builders and Realtors that originators have been increasingly turning to for leads as they become more purchase-loan
reliant, Mr. Beschel said.
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