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 eventually may mean less take-home pay for loan officers.
And if that weren't bad enough, there are scattered reports that a new brand of competition is emerging from an old source of it: insurance agents and stockbrokers.
The way it works is an insurance professional is talking to a client about a home or life policy and tells the customer the insurer has an affiliate that makes home mortgages. If 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 to the affiliate.
A handful of insurance companies, including State Farm and MetLife, have banking affiliates, and Merrill Lynch is owned by Bank of America Corp.
A loan officer in California said friends of his who work for the brokerage arm of Merrill Lynch and the insurance arm of State Farm "tell me they're now being offered the opportunity to make mortgages — and can make 75 basis points on a deal." He would not name the friends and did not want to go on the record on this subject.
Part of the issue is service and the ability to close a deal. Mortgage professionals know that competition is stiff these days, but the cross-sell from insurance agents, stockbrokers and even financial planners may be at the bottom of their worry list.
A 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." Asked if he was nervous, the trainer, who is also a mortgage banker loan officer, said, "Hardly."
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."
"How long have you had to wait to get an insurance binder?" Begley said. "You think they'll turn around a [good-faith estimate] any quicker?"
There's a twist to the story. As Anne James, a loan officer with Reliance Funding of Whittier, Calif., points out, there isn't much evidence of serious competition from the outside. But, she said, "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 that, though there is "some noise out there on cross-selling," he isn't sweating 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."
