Mortgage brokers originated nearly as many nonprime loans this year as conforming loans, according to a recent survey. The shift from prime production is diminishing the importance of pricing when choosing a wholesaler.
Few brokers have concentrated only on prime prospects so far this year, according to How Mortgage Brokers View the Shift to Non-Traditional Products by Campbell Communications Inc. The survey of more than 3,200 mortgage brokers was conducted in September.
Brokers see the mortgage market as having become "very diversified" this year, the report said, with wholesale lenders routinely offering a varied menu of prime, Alt-A and subprime loans. There was a significant convergence on the three loan categories in the broker community, Campbell said.
"Three-quarters of all mortgage brokers surveyed make at least one loan per month in all three product categories -- prime, Alt-A, and subprime," said survey designer and author Thomas Popik in a statement. "That has big implications.
"It means that Alt-A and subprime lenders can no longer focus their sales efforts on a few specialty brokers. For maximum market share, they have to cover nearly the entire broker base."
Brokers reported an average of 4.1 prime, 3.0 Alt-A and 3.3 subprime transactions per month, the Washington, D.C.-based research firm said.
The study also reportedly found that brokers are regularly using an average of 2.7 lenders for prime, 2.4 lenders for Alt-A and 2.9 lenders for subprime mortgages. And each year, brokers are trying an average of 2.7 new lenders for prime mortgages, 2.7 for Alt-A loans and 3.5 lenders for subprime products.
While the brokers generally rated different factors as being important for different loan products, there was a "surprisingly amount of similarity" among the responses given for trying a new wholesaler, according to the announcement. A "very competitive interest rate" was the most important reason in trying a prime, Alt-A and subprime lender, and the second most important factor was "distinctive loan program."
Because "the survey results clearly show that brokers want a different mix of rates and customer service depending on the loan product they are shopping for," wholesale lenders should avoid using one sales force to market different kinds of loans to the same brokers, Campbell said.
"In general, the prime market is much more sensitive to rates while the subprime market finds service to be more important," Popik said. "Lenders wanting to take advantage of the broker convergence should carefully examine what brokers want for each type of product -- that's specifically what our survey is designed to show -- and design their go-to-market strategies accordingly."