What's the difference between a loan broker and a loan officer? Before we get to the answer let's first state this: 20 years ago a loan broker was a firm that originated home (or commercial) mortgages but did not service the loans. A lot has changed in 20 years — especially in the residential (and commercial) finance industry. Today, it's assumed that a loan broker is any one person (or company) that facilitates the closing of a mortgage using wholesale table funding. To complicate matters even more some loan brokers also act as mortgage bankers — and actually have two licenses.

So, what's a loan officer? A loan officer is someone who works for a mortgage banker and who deals with the public — but a loan officer is also someone who works at a brokerage and who, yes, deals with the public. The loan officer collects the documents, the pay stubs, and pushes the loan through to underwriting at the wholesaler. In other words the phrase "LO" can apply to both mortgage banking and mortgage brokerage professionals.

It has long been assumed that at least 100,000 men and women are employed as loan brokers in the U.S. Two years ago the Bureau of Labor Statistics started tracking loan brokers. A recent government employment report found that 126,600 Americans are employed as loan brokers of one sort or another. But the BLS does not distinguish between residential and commercial mortgage brokers and what it calls "non-mortgage" loan brokers.

Overall, about half a million workers are now employed in the various sectors of mortgage banking, meaning brokers account for about 25% of all jobs in the industry — which is interesting given the fact that brokers account for a little more than 25% of all loans funded in the U.S. Four years ago about 350,000 workers made their livelihoods off all facets of the mortgage lending industry.

The Broker Share

When it comes to editorial coverage of the industry National Mortgage News always strives to be specific, factual, and clear. We believe that since loan brokers use table funding from wholesalers that means broker volumes should (in theory) match the market share of the wholesale channel. In 2005 wholesalers will account for about 27.3% of all loans produced in the U.S., which means that figure is also the loan broker market share.

Others have argued that brokers account for 50% to 60% of industry production. That figure may be true —but only if you include brokers and mortgage banking "correspondents" that fund mortgages with their own money, using (usually) a warehouse line of credit. Again, research conducted for this book shows that quite a few loan brokers also function as small mortgage bankers.

The Rankings, How the Survey was Done

In this chapter we rank the top loan brokerage firms by their 2004 loan volume. We also rank the top individual performers at shops that filed surveys with us. In March of 2005 NMN and its affiliate, BrokerUniverse embarked on an Internet survey of loan officers. This survey was different than our traditional, annual loan brokerage survey. The questions were LO specific. The results of that survey appear in chapter 8 where we rank the nation's top 400 loan officers.

In the LO survey we received more than 1,000 responses via the Internet. Our loan broker survey —faxed and emailed to 4,000 brokerage firms — garnished about 300 responses which tells you a little bit about how willing people are to answer surveys over the Internet versus paper ones that are faxed to them.

In reading the rankings and profiles here keep in mind a few things. Certain high volume brokers that your company conducts business with may be missing. If they are absent from these pages it's because they would not fill out our annual survey. Loan brokers, by nature, are privately-owned businesses. There is nothing we can do to force a firm to answer our survey, nor would we want to.

The results you see here are based on the "honor system." There is no way for us to verify a brokerage firm's volumes. We anticipate that the highest volume brokerage firms likely will be based in states where loan volumes are the highest — like California — but you also must consider the existence of net branch operators which are really super, multi-state brokering franchises. Also, commercial brokerage firms can do higher volumes than residential firms because commercial loan amounts tend to be much larger.

One last point: Unless a brokerage funds loans using warehouse lines of credit, they are not required to file annual reports with the Federal Reserve under the Home Mortgage Disclosure Act (HMDA). This means there is no official way of confirming brokerage volumes.

The Outlook for Brokers

It has long been predicted that production volumes would fall dramatically in the U.S. but each year residential fundings — purchases and refinancings — keep chugging along. Yes, 2004 was an off year at $2.79 trillion compared to the record year of 2003 when $3.9 trillion in home mortgages were funded. But at $2.79 trillion it was still the industry's second best year ever and mortgage bankers and brokers weren't exactly crying in their milk.

It's expected that 2005 will be a $2.8 trillion year which is pretty good as well. The immediate outlook for brokers is good — especially given the rise of alternative payment products like interest-only loans and payment option products. Brokers tend to gravitate toward non-conforming loans because the profit margins are better. This trend will continue for sure even though warning bells are being rung by regulators and the Federal Reserve about IO mortgages and the like. One of these days loan volumes will slowly dramatically but predicting when that day will come is a bit like waiting for Godot. The bottom line: brokers will always survive because they can adjust quickly to the market. Mortgage bankers aren't that adroit.