Commit To Us

status-mortgage-broker-commitments Lots of lenders are saying that these days.  They want brokers to commit as much volume to them as possible.

You certainly can’t blame the lenders. Volume is the gas that keeps their engine running. The tough part, for most brokers, is that there’s only so much volume to go around.

As a broker, do you commit $10-15 million of volume to a lender with great rates today?  How do you know they’ll keep their rates highly competitive?

Do you commit to lenders with promises of prompt turnaround times?  How do you know they’ll maintain their service level agreements?  (This past spring, some lenders’ SLAs weren’t worth the breath used to speak them.)

Promising a lender you’ll give them X amount of deals per month, quarter, or year, is sometimes at odds with our fiduciary responsibility to clients. We’ve touched on this before in stories like “Preferred Broker Status.” With a few exceptions, volume commitments usually benefit the lender more than the broker (and client).

All that said, if the right value were clearly defined ahead of time, it would be easy to commit millions of dollars in business to a given lender.

Suppose, for example, that you’re a broker and the following came through your inbox.

XYZ Lender Launches The “True” Status Program

Commit to funding $10 million in six months and receive:

* Yield spread adjusted for market liquidity constraints, if applicable. For a full-featured mortgage. 680 minimum Beacon. Fully income-qualifying (no stated income). 50% minimum funding ratio. Other terms apply. Call for details.

If we saw a lender commit to something tangible like this, we wouldn’t be able to dial that lender’s business development manager fast enough. Assuming the lender had client- and broker-friendly policies, we’d happily commit significant volume to this sort of arrangement.

But lenders haven’t done this (yet). Instead, brokers are asked to commit to volume targets in advance, without knowing what rates and service the lender will continue to offer. Brokers are asked to assume that lenders will deliver what’s needed to be competitive in the marketplace.

A whole lot of brokers find this extremely frustrating.

  1. I second that Rob. Too many lenders offer too much of the same. To then expect commitments from brokers is simply unreasonable IMO. The worst is when a lender asks you to pledge millions of dollars of volume before you’ve even done one deal with them. How can you even evaluate their service that way?

  2. I think its a conspiracy to show up brokers and agents as they bolster their in house departments. Has anyone noticed the hiring trends of the banks lately?
    There is a reason they are giving us crappy service as well as strick guidelines to follow. (While they don’t follow their own guidelines) They want us to fail! So they can gloat and complain to the powers that be that we need to be regulated out of business.

  3. I believe there is no recoprocity from the lenders back to the brokers in this regard. Lenders have their ‘funding ratios’ but don’t account for when their service is slow or their rates are not competitive and if a broker is forced to move the client or lose the deal completely, they are penalized in their funding ratio. There has to be a service agreement from the broker AND lender confirming what they are prepared to do.
    For instance, is it fair for a lender to nail a broker’s funding ratio if they take 10 days to get a commitment letter out? I don’t think so but in today’s current environment, the broker would have a black mark against them for going elsewhere with that deal because they had subject removal in 5 days (not the 10 days the lender took to get a commitment letter back to them).
    It’s time for brokers to push the lenders back on this or we are going to go down a very dangerous road…

  4. I wholeheartedly agree with Karen. Lenders don’t stand behind their service and rates with anything but promises, and we all know what those are worth. I can’t tell you how many times I’ve had to eat 10 basis points from my FFs because underwriters and fulfillment staff couldn’t complete a quick close file on time. There is no sweat off the lenders back because who pays? Me, the broker.

  5. I’m not entirely sure I understand this. What does the broker get for committing to such agreements? What happens if they can’t deliver the promised volume?

  6. Examples of benefits to status brokers include better rates, free appraisals, faster turnaround times, and sometimes better compensation.
    If volume targets are not reached, the lender may revoke the broker’s status.
    Cheers,
    Rob

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