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The Blurring Line Between Real Estate and Mortgage Professionals
I recently had a conversation with a full-time, exclusive real estate agent who was contacted by a large wholesale mortgage lender that he sends most of his deals to. This lender offered him an opportunity to also work as a loan officer on the transactions he brokers as a realtor.
The offer was that the lender would take 0.75% off the top of each loan while allowing the agent to choose his own real estate commission split. The lender even offered to fly him out for training to get licensed and appointed as a loan officer.
This got me thinking about the bigger implications if this is happening beyond just this one real estate agent. With mortgage volumes way down and publicly-traded lenders trying to meet revenue projections, I believe this trend of lenders recruiting realtors will accelerate.
Public companies have a fiduciary duty to maximize shareholder returns, not necessarily loan officer commissions. This was the same issue I had with Zillow. They initially claimed to be realtors’ best friend only to later become direct brokerage competition once they had a duty to maximize profits as a public company.
The same duty now applies to large lending institutions going after the source of loan referral income. The only way for them to guarantee maximum profits is by having realtors agree to route all their lending business through the company recruiting them. This could get messy until the realtor-turned-loan officer gets up to speed on originating mortgages.
So what should loan officers do? I’d carefully vet lenders to understand if recruiter realtors is part of their strategy in the current market. An alternative is to get a real estate license to increase income as both agent and loan officer. This would substantially increase workload but provide a value-add service to clients.
The bottom line is market forces seem to be pushing loans toward being yet another automated, commodity business with razor thin margins. Loan officers can either accept this reality or take proactive steps through differentiation to avoid the fate of other obsolete professions. The choice comes down to deciding whether it makes sense to stay the course or get ahead of the coming curve ball.
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