To the Point With Bob: Thoughts Ahead of #MBAIMB24–Consumers Benefit From Large, Diverse Collection of Mortgage Lenders 

(To the Point with Bob is a periodic blog by MBA President & CEO Bob Broeksmit, CMB. You can view this and past blogs here.)

The calendar has turned to 2024, which means one of my favorite events of the year, MBA’s annual Independent Mortgage Bankers Conference, is right around the corner in New Orleans. 

IMBs are the backbone of America’s mortgage market, providing homeownership opportunities for millions of aspiring homeowners, including minority households, Veterans, and those with low and moderate incomes.

That is why I was troubled by a recent Bloomberg article that uses a handful of outlier anecdotes about higher risk borrowers – whose loans naturally incur higher costs – to “illustrate” what are actually modest cost differences found in a regression analysis.  

Looking at the underlying data, Bloomberg’s analysis of millions of loan records shows that borrowers paid “about $300 more in total upfront fees on average if they borrowed from nonbank lenders instead of traditional banks.” Such a difference should not be surprising, given the significantly different business models between IMBs and depository institutions. 

As we noted in our full written statement submitted to Bloomberg for this story:

“In recent years, independent mortgage banks have become the primary source of credit for government-supported loan programs that serve minority and low-and moderate-income communities and borrowers, veterans, and first-time homebuyers. In serving these markets, they bear the costs of participating in the agency programs, doing outreach in the communities, and working with homebuyers to help them qualify for credit. They also must comply with the requirements of secondary market investors, such as risk-based pricing and mortgage insurance premiums. Fundamental differences in business models, product offerings, and cost structures makes comparing aggregate loan pricing offered by banks and independent mortgage companies problematic.”

The framing of the story does not fairly reflect the critically important role IMBs play in today’s mortgage market. First-time buyers, low- and moderate-income families, veterans – these are the homebuyers that IMBs expend significant resources to serve, as demonstrated by their dominance in the FHA and VA programs, and their outsized market share of lending to LMI and minority borrowers and communities, as recently highlighted by the Urban Institute. Moreover, IMBs are reaching these communities with lower denial rates than banks across all loan categories except for jumbo loans.  

Today’s mortgage market is well-served by a large and diverse collection of lenders of all sizes and different business models. Fortunately, today’s homebuyers have expansive lender choices, are protected by regulations that prohibit products with predatory features, and receive consumer disclosures designed by the Consumer Financial Protection Bureau to facilitate shopping. 

There is no single data point that captures all aspects of a loan, as much depends on the individual borrower’s objectives and circumstances. We know very well that when borrowers are shopping, they consider a variety of factors before choosing their mortgage lender, including local market knowledge, existing banking relationships, customer service, pricing, ease of use and technology, and speed and execution.  

Banks and credit unions are critically important to this ecosystem, providing relationship services across a wide variety of products. Although total upfront costs may be slightly higher at IMBs because they do not have government guaranteed deposits, IMBs tend to have higher approval rates (according to HMDA data), broad product availability, innovative technology, and the ability to close quickly, which, for many borrowers, will be worth the extra $300.

In today’s challenging and competitive market, seamlessly delivering the best possible loan product is so important. I look forward to gathering at the IMB conference – and throughout 2024 – to discuss strategies, policies, and legislation that expand homeownership opportunities in a safe and responsible manner to all qualified borrowers.