First, let me state two important disclosures. We are private, hard money commercial mortgage direct lenders, and 90% of our loans originate through mortgage brokers.
About half or more of the loans we see involve 2 or more mortgage brokers. And I’m always curious as to why a second and sometimes a third broker is involved? The broker’s job is to match a borrower with the best loan fit available. Most sources of funding are open to all brokers. So why does the broker with the client/borrower need a second broker to find a funding source? Can’t he do it himself? We sometimes come across the situation where both, or all brokers involved want a “full” originate fee. How is this fair to the borrower? If a broker is doing only half the job, shouldn’t he get only half the origination fee?
I started my first private mortgage fund in 2002. From April 2000 to May 2002 I was a mortgage broker specializing in hard money mortgage loans. With almost no experience in the loan business, I decided to establish some criteria for deals I worked on. First, I would not “co-op” a loan with another broker. I worked for the full “commission” or none at all. Second, I wouldn’t work on any loan where my commission was less than $10,000.00. The result of which was that I only worked on deals that had a significant impact on my earnings. And I earned over $175,000.00 my first year and over $250,000.00 my second. Then, I decided to start a fund and become a direct lender, but that’s another story.