Ask most mortgage brokers or correspondents what floats their boat, and they'll tell you customer service and quick turnaround time from their wholesalers. Ask any wholesaler the same question, and they'll say complete information and viable loans - lots of them.
Yet, in many respects, communications between wholesalers and brokers/correspondents have resembled a fishing trip gone bad: wholesalers casting a wide net of programs and rates only to catch one loan.
From rate distribution through loan purchase, brokers/correspondents and wholesalers have historically played a low-tech, hit-or-miss game of tag to convey vital information and make the loan wholesaling process happen. With the advent of automated underwriting services, the question of broker communications takes on new relevance: to gain the efficiencies associated with underwriting early in the origination process, brokers need to be part of the wholesaler's reengineered business operation.
There are a number of reasons broker-wholesaler communication inefficiencies have been perpetuated. The reasons range from the retail production emphasis of origination systems that lack wholesale lending functionality, to the proliferation of broker-targeted software packages that don't interface with wholesaler systems, to painfully slow adoption of EDI standards. This article doesn't provide a sure-fire solution to all these communication ills, but it suggests some alternative broker communications scenarios that have been aided and abetted by technology.
For the sake of defining broker communications, the following functional activities exist:
* Registration where brokers/correspondents supply the wholesaler with enough loan information to price the loan. This function is typically accomplished by filling out paperwork and faxing, or by phone.
* Rate communication where wholesalers make available their most current loan products and rates to all participating broker organizations.
* Rate lock-in where brokers affix a firm interest rate to the borrower's loan and alert the wholesaler of their intent to deliver a loan at that interest rate.
* Loan file submission where the loan file with complete documentation is handed over from the broker to the wholesaler.
* Interim communications, including wholesalers confirming the terms of the lock, as well as loan status updates, additional information needs and conditions for underwriting review and approval.
Communication scenarios vary widely, but generally the business transaction is initiated when the broker calls the wholesaler with a potential loan and supplies enough information to lock in that loan. After that, the wholesaler may not hear again from the broker until the loan file comes in the door. If the lock expires and no loan file materializes, the deal's off. But when the file arrives, the wholesaler kicks into high gear to underwrite and fund the loan as soon as possible.
Brokers may or may not have their own loan origination systems to manage and track loan progress. But even when they do, it's rare that these systems prove directly compatible with the wholesaler's system. So the wholesaler is faced with duplicate data entry to set up the loan on its system and perform the underwriting.
Problems from a wholesaler's perspective
From a wholesaler's perspective, problems impeding the flow of information between wholesalers and their brokers usually fall within these defined categories:
* Data issues - inconsistent data formats between systems that result in re-keying data received from brokers and the receipt of incomplete data.
* Timing concerns - timeliness in distributing rates, registering loans, locking in prices and sending confirmations.
* Management information - lack of access to pipeline projections, funding results and broker performance.
The broker sees the flip side of the coin, in many cases dealing with information overload from its wholesalers. "We're in the information business, and it boils down to determining what the best use of our time is," says Bert...