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Wholesale Lending Seen as Primed for Growth

After gaining market share in the fourth quarter, the wholesale lending channel is poised for further growth, according to Mat Ishbia, president and CEO of United Wholesale Mortgage.

Wholesale brokers are making a comeback,” Ishbia said this week during a webinar sponsored by his firm, which was the second-ranked lender in the broker channel in 2014, according to Inside Mortgage Finance. “We see it growing again in the first quarter, second quarter and beyond.”

An estimated $117.0 billion in wholesale-broker production was originated in 2014, accounting for 9.4 percent of total originations. In the years before the financial crisis, broker production accounted for about 30.0 percent of total originations.

Ishbia suggested that years of declines in broker originations and market share are poised to reverse. He pinned the declines on regulatory uncertainty, which encouraged brokers to work for retail originators.

“Fear leads to people going to certain places,” Ishbia said. “People ran to the large banks to be protected, and that’s understandable.”

He said broker originations are more attractive for borrowers as well as for loan originators. Ishbia said brokers are more nimble than retail loan originators, they have more product options for borrowers and they account for an outsized share of purchase-mortgage originations.

“Brokers have the option to go to whatever wholesale lender has got the best opportunity, the best turn times, the best availability at that given time,” Ishbia said. “The best place for a borrower to go is a mortgage broker.”

Ishbia said 20 percent of purchase mortgages are originated by brokers. He noted that real estate agents are often more comfortable working with brokers than large banks due to better communication and closing times. “Mortgage brokers are able to deliver that more often than retail lenders,” he said.

Wholesale-broker lending is also more attractive than retail lending for loan originators, according to Ishbia. “For 99 percent of loans, borrowers are better off going to a broker shop where the broker can shop for them and find the best price,” he said.

Ishbia conceded that banks have been able to offer portfolio products that weren’t available to brokers in recent years, but that’s changing due to demand for originations and servicing from nonbanks. “Wall Street isn’t afraid of brokers anymore,” he said.

Ishbia also downplayed concerns that the Consumer Financial Protection Bureau has targeted wholesale lending. “The CFPB is trying to make it so that the borrower gets the best options,” he said. “That’s really what mortgage brokers do.”

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