By Charity Ohlund
As behemoth companies continue to dominate how we buy everything from mobile phone service and cable tv to where we shop online for, well, just about anything, it may seem that America is trending toward bigger being better.
But that’s not the case when it comes to home mortgages. More than half of all home-purchase loans now come from independent (i.e. non-bank) lenders. In fact, the three biggest banks that enjoyed the lion share of the market for the last 20 years – JPMorgan Chase, Wells Fargo, and Bank of America – now only account for less than 21 percent of purchase loans combined.
What’s behind this shift? Here are 5 reasons indie mortgage companies like ours continue to set themselves apart in a crowded and competitive field and why we have demonstrated such tremendous growth.
Getting a mortgage loan is the biggest financial transaction most people will make in their lives. It involves research and education on the part of the borrower, and guidance and relationship building on the part of the lender. Because locally-owned brokerages are highly invested in the community where they do business, they earn a strong level of trust from consumers.
Indie lenders are unencumbered by bureaucratic red tape and don’t have to run things up the chain to some distant “headquarters.” We can respond to changes in local market conditions much faster, which benefits both home buyers and sellers.
And when new technology become available or changes are made to regulations, indie brokerages can adjust quickly without a months-long training and implementation project.
Casey Fleming, author of “The Loan Guide: How to Get the Best Possible Mortgage,” believes the trend toward brokers and private companies will continue. “There is no way banks can compete with a broker’s cost structure,” he says. “Banks have dozens of layers of management and ridiculous inefficiencies due to their bureaucratic nature. Brokers are lean, nimble, and cost-effective.”
3. Perfection Not Required
Many banks limit their conventional 30-year fixed-rate loans for borrowers who neatly fit into the approval box. If you aren’t rich or if your credit score isn’t perfect, you’re more likely be turned down by a bank. Banks like to approve jumbo loans for high-net-worth individuals that they keep as portfolio loans so they can sell other banking services to those customers.
But that doesn’t mean that indie lenders are approving dangerous loans. During the last housing boom, many unscrupulous lenders targeted subprime borrowers.
“This time around, the non-bank lenders are not being reckless,” says Rick Sharga, chief marketing officer at Ten-X, an online real estate marketplace. “Some offer loans to borrowers with lower FICO scores, but they are still not making risky loans. Consumers are benefiting from non-banks because they offer more opportunities to borrowers who are not perfect.”
4. Keeping Your Money in Your Community
Several lending companies in Kansas City aren’t banks, but they are still branches of faraway corporate headquarters from places like Nebraska, Virginia, Wisconsin, and Illinois.
Profits made at those branches are collected and sent to those states. With a truly locally-owned lender like Fountain Mortgage, every dollar made flows back into our community and is re-invested into our local economy.
5. Culture of Giving
When a company is truly local, it is also committed to creating positive change in its hometown. And Fountain Mortgage is no exception. We are incredibly grateful for the support of the community that has enabled our company to thrive. And our team and culture has been made even stronger by the shared belief that we should return that support every single day.
That’s why we established our Fountain Gives Back program to make a $50 donation after every single closing to a non-profit of the borrowers’ choice. In just the first quarter of our program, we were able to give more than $10,000 to help cancer patients, homeless veterans, sick pets, teen volunteers, community kitchens, and so much more.
Borrowers and mortgage professionals alike are choosing firms with deep roots in the city where they want to live and work. Trust, efficiency, flexibility, re-investment, and a deep commitment to the community we serve makes us proud to be an “indie,” and confident that what we do and how we do it will continue to resonate with our clients.