In 1999, I bought a car entirely online. I typed in all the specs I wanted, and dealers from all over the state submitted offers to sell the car I wanted (a 2000 black Lexus GS 400 sedan).
It took me all of five minutes to fill out the form; I then waited for the bids (in a super clear format required by the platform) and just said “yes” to the lowest price.
Car dealers across the country saw this and panicked. So, naturally, their lobbyists forced Congress to outlaw this method of business “to protect consumers.”
So, now consumers must waste hours in dealerships every time they buy a car. Thank God!
One of the reasons the Canadian and European economies are crashing is because their governments protect domestic industries from competition – stemming innovation, and worse, forcing consumers to pay far higher prices.
I read yesterday that Canadians pay as much as four times more for wireless services. Sure, these protections save a few jobs in a particular industry, but the cost to the country and the economy is astronomical (and the true beneficiaries are the executives of the protected companies). It will be years (if ever) before Canada and Europe catch up to the U.S.
I recently read an interview with B of A’s head of consumer lending (which includes mortgages). One of the things he predicted for 2026 was a shift to alternative mortgages.
I laughed – because he is about five years behind.
The rest of the mortgage industry was – out of necessity – forced to fully embrace alternative mortgages years ago.
These mortgages of course include most of the loans commercial banks like B of A can’t do, e.g. bank statement loans, DSCR/rental income loans, no ratio/no income loans, hard money loans, bridge loans, guaranteed backup offer loans, and more.
Not only could JVM not survive without these loans, but tens of thousands of homebuyers would not be able to buy homes without these loans.
B of A, being the fierce competitor that it is, is no doubt not taking this lying down! I am certain their lobbyists are warning Congress (while also signing campaign checks) right now about the risks these loans pose to consumers.
Even more risky though is JVM’s ability to offer lower rates to consumers for conforming, FHA, and VA loans because our overhead is so much lower. I am certain B of A is trying to stop that harm too with even more “protections.”
Three Mortgage Banking Channels
So, besides desperately reminding readers once again not to support politicians who offer more regulations to “protect us,” I am also reminding readers of the three channels for mortgage lending and what their advantages are.
I. Commercial Banks – like B of A. B of A is awesome when it comes to jumbo loans, some ARMs, and down payment assistance. Commercial banks have a huge advantage when it comes to “portfolio loans” (that are not sold after close) because their cost of funds is so low (they get to lend out nearly free deposits). Commercial banks’ disadvantages include: (1) too much overhead; (2) too regulated; (3) too slow and bureaucratic – largely because of #2; and (4) the inability to do alternative mortgages (see above).
II. Brokers. This channel has been surging over the last few years. Brokers do not underwrite or fund loans themselves but instead send them out to third-party “wholesale lenders” to underwrite and fund the loans for the brokers. Brokers have the ability to shop every loan amongst dozens of lenders – to ensure their clients get the best rate or loan program. They also have very low overhead, particularly now that some wholesale lenders and large brokerages offer free tech to brokers.
The drawbacks to brokering include the lack of access to many special loan programs, down payment assistance programs, and jumbo loan programs offered by major commercial banks that “mortgage banks” (see below) do have access to. Brokers also can’t build their own appraisal panels or control for speed when necessary – making consistent fast closes more difficult. These are the reasons why JVM left the broker channel over ten years ago.
III. Mortgage Banks (JVM’s channel). Mortgage banks only fund mortgage loans. They don’t offer checking or savings accounts or offer any traditional banking services. They originate, underwrite, and fund mortgage loans (with huge lines of credit), and then sell the loans on the secondary market as fast as possible after the loans fund.
JVM is in the mortgage banking channel because we want access to all the commercial bank loan programs that commercial banks only offer to mortgage banks (and not to brokers), we need underwriting and speed control, we can build our own far superior tech stack, and we want our own appraisal panel (because we had so many appraisal issues when we were in the broker channel).
Equally important though is the fact that JVM can still broker loans too! We work directly with dozens of wholesale lenders – to ensure we have access to every alternative loan product that our mortgage bank might not have access to.
I just hope that B of A doesn’t succeed in convincing Congress to protect consumers from the “evil practices” of brokers and mortgage banks… If they do, loans will be far more expensive, and tens of thousands of buyers will no longer be able to find financing.
