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Why Loan Officers Don’t Use Their Own Company For Financing; No Loan Officer Models

A woman smiles after seeing how much lower her interest rate when she works with a

OTHER LOAN OFFICERS CAME TO ME FOR MORTGAGES

Prior to the 2008 Mortgage Meltdown, ironically, a major source of business was other loan officers coming to me for mortgage financing.

They came to me back then for several reasons: 1) My rates were lower than theirs b/c of my model and the volume discounts I had negotiated; 2) I was notoriously honest, and 3) They knew I would not share any of their financial information.

Humorously, many loan officers were very concerned about privacy b/c they overstated their volume and income so much (aka “bragged”) – and they knew their secrets were safe with me. 😊

Flash forward to 2021, and loan officers and employees from other mortgage and commercial banks are still using us for mortgage financing – frequently in fact.

The reasons now have to do with the fact that our rates remain lower (much lower in most cases) than most of our retail competitors’, and b/c of speed, as we can often move much faster than our competitors.

I thought of this when Heejin (my wife and JVM co-founder) sent me a link to a company called Own Up.

I found the website very interesting for several reasons:

  1. Didn’t Use Themselves For Financing. The founders say this: “Our founders used to be mortgage bankers, yet they didn’t go to their own bank to get a mortgage.
  2. They Tout A “No Loan Officer” Model. The website explains that borrowers can save money b/c the firm does not have to pay loan officer commissions, which average “1.15% of the loan amount.
  3. Are They Brokers? I think they are “brokers” that shop borrowers’ loans among wholesales lenders for the best rate, but I am not sure.

I should add that I know nothing about this company other than what I can see on the website and I give credit to the founders for trying to carve out a clever niche.

I am only blogging about this b/c it illustrates some interesting trends and topics.

LOAN OFFICERS NOT GOING TO THEIR OWN BANK

When I see so many loan officers and mortgage employees not use their own companies for financing, it always gives me great confidence in our own model at JVM.

This is both b/c they often come to us for financing, as I mentioned above, and also b/c our internal staff always uses us for their own financing; if they didn’t I would be very concerned about our competitiveness.

NO LOAN OFFICER MODEL

This is the bigger trend we are seeing (particularly now that refis are waning and rate competition is heating up), as lenders fight for market share in the face of increased capacities and decreasing overall volume.

B/c loan officers really do add an additional 1.15% (of the loan amount) to the cost of every loan on average, loan officer models are almost always associated with higher rates.

When there is excess demand for mortgages like we saw in 2020 with the refi boom, those higher rates do not impact overall business that much.

But, when markets tighten, higher rates can massively impact volume – and that is why so many mortgage lenders are trying to establish no loan officer models like JVM’s.

Our rates are lower b/c we don’t have to pay loan officer commissions. It is that simple.

RATE SURVEYS

We know our rates are lower than those of most loan officer models b/c we do very extensive rate surveys every Tuesday.

While a rare few lenders sometimes have lower rates than we do for some very specific types of loan products, they are almost always lenders that do not have “independent loan officer models.”

I should add too that they are also lenders that focus on refis and that are often notoriously bad at purchase money mortgages – so “buyer beware.”

More importantly, our rates are almost always lower (much lower in most cases) than those offered by the loan officer models – b/c we don’t have to pay loan officer commissions.

BROKERING

This is the last topic I want to touch on, as brokering seems to be coming back to the forefront.

But, there are a few misconceptions in regard to brokering:

  1. Only brokers “broker” for the best deal. This is a misconception b/c we too effectively broker for the best deal every time we lock a loan, as we shop among dozens of different “investors” that will buy our loans. This is especially the case with jumbo financing where mortgage banks can usually offer far lower rates than brokers ever can. My rate quote below in fact is probably 1/2% LOWER than any jumbo rate offered by a broker in today’s market.
  2. Brokers can shop for the lowest rate/Capital Markets Pickups. One of our biggest sources of revenue at JVM is the additional “pickups” we get after a loan closes for loan servicing rights and other reasons, and this allows us to offer lower rates. Brokers and most loan officers in general do not get any revenues from these pickups and thus have to charge higher rates.

Jay Voorhees
Founder/Broker | JVM Lending
(855) 855-4491 | DRE# 1197176, NMLS# 310167

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