THANKS IN PART TO A NEW GENERATION OF TURBO-CHARGED online broker portals, wholesale origination of loans is a rapidly growing business. According to February 2005 survey findings on production volume growth of the top 10 mortgage lenders in the United States, the wholesale mortgage channel represents a healthy 23 percent--or just more than $360 billion--of the 2004 total loan volume of $1,573 billion underwritten by these lenders (see Figure 1). [??] How are these lenders managing such substantial volume through the fragmented broker network, and how are they attracting top-performing brokers to work with them? In many instances the answer is by providing cutting-edge technology including fully automated online portals that can underwrite, price, cross-sell and respond to brokers' loan requests 24/7. [??] This new generation of broker portals goes beyond simply offering rate quotes and calculating ratios. Today's top broker portals are delivering the ability to select the most appropriate loan structure for the borrower. In some cases, the broker portals allow loans to be tailored to the individual borrower--even going so far as to suggest ways to consolidate debt in order to create a deal for which the borrower can qualify. [??] As technology becomes less expensive, more and more midsized and regional lenders are looking to deploy broker portals in order to grow their wholesale business.
Growing wholesale channel
Lenders are increasingly looking to the wholesale channel to grow their loan origination business. An analysis of the top 10 wholesale mortgage originators shows that loan volume through the broker channel has jumped from $234 billion in 2000 to $872 billion in 2004, according to Inside Mortgage Finance's top-30 originator rankings and Securities and Exchange Commission (SEC) filings, 2000 and 2004. As lenders continue to shutter branches and eliminate staff in order to reduce costs, the wholesale-broker channel represents a production avenue that benefits from a variable-cost structure and an easy way to scale their sales as needed.
Another factor driving growth in wholesale lending has been the proliferation of online banking. While consumers' comfort level with the Internet has pushed more retail lending online as well, the impact of online lending has been more profound in wholesale.
Online wholesale lending grew to 20.5 percent of total loan origination volume in 2004, while online retail mortgage lending grew to only 7.3 percent of volume, according to a report from Needham, Massachusetts-based Tower-Group. The report is titled Online Wholesale Mortgage Lending: The Mortgage Megachannel. Online wholesale adoption is further along because brokers execute several mortgage transactions per day and are therefore more willing than consumers to spend the time to learn how to use an online system.
Broker portals: A primer
A broker portal is simply a lender-hosted Web site that offers various online tools to apply for--and in many cases underwrite--loans. The earliest broker portals were simply online brochures that provided brokers with the lender's rate/price information and loan product descriptions. As Internet technologies matured, these portals began to offer certain interactive functions such as online loan-payment calculators and rudimentary qualification ratio tables.
As technology matured still further, portals began to be integrated into lenders' actual back-office operations so information submitted at the portal Web site was stored on the server and could be entered into the corporate workflow or be otherwise acted upon later.
A typical broker portal today is able to automate the entire borrower prequalification process. Examples of lenders that offer broker portals today include GreenPoint Mortgage Funding, Novato...