No doubt, these are tough times for loan officers at both nonbanks and depositories. Loan production is down, the purchase money business is in the tank, and new compensation rules may result in LOs taking home less money over time.
And if that weren’t bad enough, there are scattered reports that a new brand of competition is emerging from an old source of competition: insurance agents and stockbrokers.
It works like this: an insurance professional is talking to a client about a home or life policy, and then reminds the customer that the insurer has an affiliate that also makes home mortgages. Depending on whether the insurance agent has a mortgage banking license and is registered with the Nationwide Mortgage Licensing System and Registry he can take an application and pass it onto the insurer’s lending affiliate.
A handful of insurance companies—State Farm and MetLife come to mind—have banking affiliates as well (as does Merrill Lynch, in the form of Bank of America).
One California-based LO said he has friends who work for the brokerage arm of Merrill Lynch and the insurance arm of State Farm. “They tell me they’re now being offered the opportunity to make mortgages—and can make 75 basis points on a deal.”
But when pressed for specifics, he declined to provide the names of his friends and didn’t want to go on the record about this new, potential form of competition.
Then again, there is another issue here as well: that of service and the ability to close a deal. Mortgage professionals know that competition is indeed stiff these days, but it appears the “cross-sell” from insurance agents, stock brokers and even financial planners may be at the bottom of their worry list.
One mortgage trainer who works in the Northeast corridor said he had five insurance agents in an NMLS class he taught this past fall. “They were nice guys but they knew nothing about the business,” he said. “State Farm required them to take the class and get licensed. It was clear to me that they were just paper pushers, hoping to gain some type of referral compensation.”
Was this trainer—who also is a mortgage banker LO—worried? “Hardly,” he said.
Steve Begley, who works as a loan officer, said he has successfully competed against the likes of State Farm and Merrill Lynch in the past. “This really isn’t anything new,” he said. “State Farm has been offering auto loans for years with limited success.” He asked, “How long have you had to wait to get an insurance binder? You think they’ll turn around a GFE (good-faith estimate) any quicker?”
Then again, there’s a twist to the story as well. As Anne James, an LO with Reliance Funding of Whittier, Calif., points out, there isn’t much evidence of stiff competition from the outside but “I have seen a lot of loan officers and brokers go into insurance.”
Marc Savitt, a past president of the National Association of Mortgage Brokers, and a West Virginia-based broker, said there is “some noise out there on cross-selling” but added that he’s hardly worried about it. “If a local insurance agent takes one of my customers, just one, I’ll let them know that they’ll never get any insurance referrals from me. If he’s in the insurance business, they should stick to that.”
