APR 2, 2015 12:38pm ET loan officers

Experienced loan officers are leaving banks and going solo in greater numbers, lured by the prospects of better pay and access to more mortgage products.

The shift seems to begin taking hold at the end of last year and continued through early 2015, said Don Frommeyer, the chief executive officer of industry trade group NAMB-The Association of Mortgage Professionals.

According to the Nationwide Mortgage Licensing System, there were 16,022 unique mortgage company entries in the database at the end of the fourth quarter, up from 15,887 in the third quarter but down from 16,178 at the end of 2013. NMLS does not break out data on types of licenses.

A major issue for many bank loan officers is that they are limited in the kind of products they can offer to consumers. That can be a problem in serving consumers who need a nonqualified-mortgage product other than a jumbo loan.

At the same time, mortgage bankers are cranking up non-QM offerings in the wholesale channel. That movement is likely to increase during 2015.

“If you don’t have the product where you work, you can’t do that purchase loan and everyone is scraping for purchase business,” said Drew Waterhouse, the managing director of mortgage industry recruitment firm Hammerhouse.

“I work for a bank, I only got one option [to offer consumers],” added Frommeyer, who is also a senior loan officer at American Midwest Bank in Carmel, Ind.

“When you work as a broker you have three or four. If you run [a scenario] through one [lender] and it doesn’t work, you can turn around and run it through another one. I can’t do that at my company. If it doesn’t work at the bank, we’re done.”

A sign that the broker is coming back is that loan purchasers are ramping up their hiring. There were a couple of slow years for Hammerhouse when it came to recruiting account executives. But since the start of the year, there has been an increase in calls by wholesalers looking to use Hammerhouse’s services to find these business-to-business sales people, Waterhouse said.

“Maybe they [the wholesalers] believe there [are] going to be more people on that side who are going to broker so they are building up their third-party channels,” he said.

Both men also agreed that the new disclosure format set to take effect on Aug. 1 benefits brokers.

The rule requiring separate disclosure of broker compensation will not apply to the new forms. Any perceived disadvantage for mortgage brokers in having to tell the consumer the amount they are getting from the yield-spread-premium payment is no longer applicable.

This is leading bank employees to believe they can earn more money by going independent, Waterhouse said.

But it is not for every loan officer to attempt. “It has to be a very sophisticated loan officer, one who has the ability to understand how a profit-and-loss statement works, to actually be successful doing that.

“But we have seen it happen. We’ve seen people leave depositories and correspondent mortgage bankers, regional and national, and do their own shop again,” Waterhouse said.

A good example is Gregg Harris, a mortgage broker in the St. Louis area, to revive his LenderCity franchise concept. Back in 2011, during the despair of the post-bust period, Harris first tried to roll out LenderCity.

He attracted the attention of Boulevard Bank, and LenderCity became a subsidiary in 2012. Their relationship ended at the close of 2014, and Harris is looking for other want-to-be independent originators who share his vision.

“I’m being told by [account executives] that they’ve talked to guys who had been their account and then joined a bank [who] are going back to being a broker,” he said.

Greater freedom to run one’s business holds a lot of appeal. “For me, coming from a banking relationship and gaining control of my business again has been night and day,” Harris said.

And he believes he is not the only person who felt that way. If it was going to be equally difficult to do business, most loan officers would rather be on their own than work at a bank.

LenderCity offers marketing and back-end support to its franchisees. Each franchisee has to be individually licensed but would do business as LenderCity. Harris said it should be in the second half of the year before the first franchise agreement is announced.

LenderCity is a member of Wholesale One and draws on that St. Louis co-op for support. Harris’ own mortgage-broker business got licensed in five states in just three months.

His transition back to brokering can serve as a model for the loan officers he is looking to attract to LenderCity.

“I feel like Rip Van Winkle; I went to sleep and woke up and everything has moved. The process has changed a little bit, but all in all it’s very similar,” Harris said.