Mortgage brokers are compensated through finders fees paid by lenders. After a mortgage closes, the broker gets a percentage of the loan amount for preparing and managing the client’s file.
When the client’s term is up the lender will try to get the client to renew. If the client renews, the broker who brought the lender the business in the first place usually gets nothing. That’s because few lenders pay brokers anything on renewal. If they do, it’s likely in the form of trailer fees (a small percentage of the loan amount each year).
Now, thanks to Street Capital, there’s a new model. They’re the first lender to automatically pay full commission to brokers when a client renews. Mortgage planners who send deals to Street Capital no longer need to worry about the lender “stealing” their client.
It’s a compelling prospect if you’re a mortgage planner. Other things being equal, it’s a clear reason to send business to Street Capital. In fact, Street Capital will likely see their mortgage volume soar in 2008 solely because of this policy.
Our take is simple. Street Capital has opened the genie bottle and, in time, other lenders will surely follow their lead.
Most brokers will agree, it’s long overdue.
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