Why Mortgage Brokers Take on New Importance During COVID-19
As America adjusts to life with COVID-19, the housing market has shown signs of recovery. The MBA recently reported that new home purchase applications in May were up 10.9 percent from a year ago, and up 26 percent compared with April 2020.
Yet it would be inaccurate to say that things are returning to normal. Customers still face many challenges and want someone to educate and guide them moving forward. Here’s why mortgage brokers are in an ideal position to play that role – and why, as a result, they’ll take on new importance during COVID-19.
Borrowers Face Complex Mortgage Decisions
That’s because many lenders have tightened their lending standards. For instance, many big-name institutions now require borrowers to have a credit score well over 600 in order to qualify. JPMorgan is requiring customers to have a 700 credit score and put down at least 20 percent on their home.
Several institutions such as Wells Fargo have also all but stopped accepting applications for HELOCs and home equity loans. While designed to protect lenders from potential defaults, these moves have shut out even financially stable borrowers from accessing products.
The current volatility of the mortgage industry means many borrowers will have difficulty keeping up with lenders’ decisions and finding the products they need. As a result, brokers today stand to make a considerable impact. They can help find products that customers wouldn’t have found on their own and simplify an otherwise turbulent mortgage experience.
This is great news for the wholesale lenders who depend on brokers to reach borrowers.
Borrowers Trust Brokers to Act in Their Best Interest
A Deloitte study found that 82 percent of broker customers believed their broker was acting in their best interest, compared with just 73 percent of direct-to-lender customers. What’s more, broker customers had greater confidence in this assessment than their direct-to-lender counterparts.
This trust is especially important at a time when education and guidance will likely be part of the borrowing journey. Because borrowers already trust brokers more to act in their best interest, they’re more likely to be confident with recommendations brokers make even when that recommendation is different from what a borrower originally wanted or expected.
For instance, a customer who recently lost hours at their job may want to refinance their loans to have additional cash on hand each month. Brokers can advise them on what’s feasible and work with them to find a practical solution that satisfies the customer’s needs.
Wholesale lenders can leverage this benefit by providing brokers with the digital tools that make it easy for brokers to compare products and find suitable solutions for borrowers.
Brokers Speed Up the Borrowing Process
To secure a mortgage without a broker’s help, borrowers would have to conduct research independently and submit multiple applications with different lenders.
But today’s borrowers face an even more grueling process than normal due to constant changes to the mortgage industry. Many may come out of their search feeling frustrated and still without the mortgage product that they hoped for.
Luckily, brokers already have industry knowledge and information on a variety of products, making them the only resource that borrowers have to interact with. In just a few conversations, brokers can give their clients a sense of what options they have, educate them on these products, and finally, secure the best deals. The result is greater customer satisfaction through saved time, money, and effort.
A lengthy mortgage experience is the last thing customers need right now. Brokers can speed up the borrowing process while giving borrowers confidence that they are getting the best deal possible.
Brokers Are Here to Stay
Brokers have steadily increased their market share since it fell in 2008, accounting for 16 percent of all originations in 2019. What’s more, one out of three millennial borrowers rely on mortgage brokers, which is significant given that millennials currently make up the largest cohort of borrowers (37 percent). This could indicate broker popularity increasing in the years ahead as older buyers phase out of the market.
COVID-19 could be the jump starter for this broker resurgence as today’s borrowers need partners who can help them understand changes and make optimal decisions. Brokers can deliver on these expectations, and wholesale lenders can empower them to work even better by providing the right resources and digital mortgage technology.
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