Key Takeaways: 

• During periods of lower business activity, larger financial institutions and mortgage lending brands find new ways to make up margin, leaving lenders to foot the bill.
• Changing guidelines and compensation are often a sign that an institution is trying to shave margin to make up for overspending in boom times.
• Some mortgage lending partners give lenders transparent P&L structures to take better management of their business’s growth.

From March of 2022 through July of 2023, the Fed raised interest rates to fight inflation and maintain high levels of employment. While this positively affected the economy, it was a different story for mortgage lenders. Refi’s dried up, and the housing market contracted. 

Popular wisdom would have it that working for a large company through economic turbulence would be the safer option. But we’ve found the opposite. Several legacy institutions and large net branch brands went through multiple rounds of layoffs and had to adjust pay structures to stay afloat. 

Those who had taken advantage of mortgage branch opportunities were nimble enough to weather the headwinds. They had the product variety, support, and financial flexibility to respond to new market conditions meaningfully. And the Fed lowering interest rates again should be a boon to the refi and new homeowner market. 

We believe those in a position to scale flexibly and quickly will be best positioned to take advantage of the influx of new business about to hit the market. 

But is a mortgage branch opportunity right for you? We’ve repeatedly seen six red flags pop up at larger companies. If you’ve found yourself wrestling with these six questions, it may be time to look for a better opportunity. 

“How did you want that done again?”

Guidelines and processes are necessary. But a company that habitually changes those guidelines demonstrates a lack of respect for its employees. Even something as simple as making you do more of the manual work can be a massive time sink. Then there’s the arbitrary compliance standards that make it harder to get loans through. 

Regardless, rather than support you and find ways to make your job easier, they throw up more and more roadblocks to meeting your client’s needs. Even a simple lack of support in the underwriting and compliance process makes doing business needlessly difficult. Experiencing these symptoms is a giant red flag, indicating that it may be time to look into other avenues. 

“You’re lowering my pay?”

Commission is the bread and butter of loan officers. But keeping shareholders happy is the top priority of a large mortgage company. These competing interests often mean lower commission rates and more hurdles between you and your cut when the going gets tough. A full P&L branch prevents your company from extracting every penny from lenders at your expense. 

Running your own mortgage branch means you set the rates and the compensation so you never have to worry about being paid well for your hard work. It also allows you to act as an owner and entrepreneur rather than an employee. Because you set the rates, you can give yourself the headroom to bring on team members to grow your business. 

“Whew! I really dodged a bullet on that one!”

In October of 2023, the Wall Street Journal ran an article about Guaranteed Rate laying off hundreds of employees and clawing back the signing bonuses. It’s beside the point whether taking a signing bonus in this industry is a good idea. However, one of the reasons people work for large companies is because they expect more job security in economic downturns. At least, that’s the conventional wisdom. 

But history tells a different story. Just ask any former Arthur Anderson, Bear Stearns, or Lehman Brothers employee if working for an old and large corporation brought them job security. The bigger the company, the less control and influence you have over its future. This means you’re more susceptible to layoffs during an economic downturn. 

Even if you’re lucky enough to survive rounds of layoffs, the fact remains that you aren’t in control of your destiny. 

Layoffs indicate the company has insufficient resources to cover its commitments. That means your life is about to get harder. A more independent mortgage branch opportunity insulates you from layoffs and grants you more control over your future. 

“Why is this rate so high?” 

No one escapes the Law of Supply and Demand. When money is cheap and business is booming, taking on excess risk is easy. But what did you see when rates went up? Business deteriorates, and suddenly, it’s a struggle to pay the bills. All of that cheap money during the boom cycle turns into a lead balloon. 

Due to pressure from investors, companies often raise their rate more quickly than the national rate and keep it up to cover the shortfall. But you have to remember that it’s ultimately the Fed who sets the rate. So if you’re finding it difficult to compete on the rate, there’s a good chance your institution is trying to pad their overcommitments. 

The concept of business cycles is no secret. If your company acted as if the good times would last forever, you’re dealing with shortsighted management, and that’s a massive red flag. It may be time to look into a mortgage branch opportunity.

“A little help, please!” 

Layoffs, cost-cutting, and rate hikes can only mean one thing: less support. You’d think that larger companies would have the resources to invest more in their employees when times get tough. But we’ve found the opposite to be true. Often, you’ll find yourself living on an island when you most need the extra help. 

This is because large companies have a bad habit of taking on bloat during times of free-flowing money. Instead of having a rainy day fund, they have to make drastic cuts to protect their bottom line.

One of the advantages of a mortgage branch is bloat resistance. When times get tough (as they always do), your operation is already lean enough to make it through without needing to take drastic measures.   

“Sorry, we don’t have a product for that.” 

Those words should never have to come out of your mouth. But you have zero control over the product portfolio unless you run your own P&L. Whether it’s FHA, VA, Jumbo Products, Reverse Mortgages, etc., not every company offers everything you need to capture the most business. 

Not only are you getting squeezed by rate hikes and the threat of layoffs, you have to give up on business simply because your company didn’t invest in its portfolio offerings when times were good. 

With the Fed lowering rates in the Fall of 2024, there will be an influx of new business in the market for you to capitalize on. Why not set yourself up to capture as much of it as possible? Even if your goal is to niche down, the products you don’t sell should be your choice and not imposed on you by your institution.  

“How does a MortgageRight mortgage branch opportunity fit into this?”

MortgageRight continuously monitors industry conditions and strives to keep our financials, personnel, and market positioning ready to capitalize on the good times and weather the bad. 

If you’ve been asking yourself these questions, the red flags you’ve seen could be a signal that you should start looking into other options. Click here to schedule a conversation with one of our specialists to explore opportunities with a mortgage branch.