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Reasons LOs Are Becoming Mortgage Brokers

February 01, 20234 min read

There is a growing trend of loan officers becoming mortgage brokers. If you are in the mortgage industry, you may have noticed a significant number of retail loan officers leaving their companies to join a brokerage firm or start their own mortgage brokerage. 

It’s no wonder why! The market share of mortgage brokers is currently at its highest level since 2006.

A graph shows the increasing broker market share over the years 2016-2022. 2016 is 14.61%,2017 is 16.33%, 2018 is 17.14%, 2019 is 19.76%, 2020 is 18.16%, 2021 is 20.61%, and 2022 up till the third quarter is 22.25%

Why Are More Loan Officers Making The Switch To Becoming Mortgage Brokers?

Basically, there's a difference between a mortgage broker and a retail loan officer (or a bank loan officer).

 A regular loan officer usually only works with one lender, which limits their options for clients and their ability to customize loans. They also don't have as much control over the loan process as mortgage brokers do.

As a mortgage broker, loan officers can work with multiple lenders and offer a wider variety of loans to clients. 

This gives them more options and control, allowing them to better serve their clients' needs. Plus, being a mortgage broker can lead to more opportunities for career growth and success. So, it's no wonder why more loan officers are choosing to become mortgage brokers.

Reason #1: Rate Competitiveness

Okay, so one big reason why loan officers are becoming mortgage brokers is because of the competition. Retail lenders and mortgage brokers do things differently, and that affects how competitive they are.

Retail lenders tend to charge more during slow times to make money, but that means their loan officers have to sell loans at certain rates, even if the market changes. On the other hand, mortgage brokers try to charge less to get more business. They're always trying to beat each other's rates, which makes it more competitive for borrowers.

Also, because the market changes a lot, retail lenders might not be able to keep up as well as brokers can. Brokers can shop loans with different wholesale lenders, which gives them more options. Even if retail lenders get more competitive, they might not be able to keep up with the market changes in the future.

Reason #2: Increased Access To Technology

Another reason why more loan officers are becoming mortgage brokers is because of the technology available to them. Before, loan officers didn't have a lot of options when it came to technology to help them with their job. Nowadays, there are more and more options for them.

A lot of mortgage companies have their own software to help with mortgages, but it was mostly focused on the back-end and not the user experience. Now, the software is getting better and more user-friendly, which makes it easier for loan officers to use.

This is especially helpful for loan officers who want to become mortgage brokers, because they can use software like Arrive, which is made specifically for mortgage brokers. This makes the transition easier because they don't have to worry about not having access to the technology they need.

Also, big mortgage companies sometimes have trouble keeping up with technology because they have to worry about data security and privacy. Since technology is changing so fast, it's harder for them to stay up-to-date. So, this gives small broker shops an advantage over bigger mortgage companies.

Another thing to consider is those big mortgage companies face challenges when it comes to technology, like managing data security, privacy, and hardware security. This can slow down the process of technological changes, unlike smaller broker shops which are agile in adopting new technology and stay updated in the fast-paced economy.

Reason #3: LOs Want More Control Of Their Mortgage Business

Being a loan officer at a retail company can be limiting, but moving to mortgage brokering gives loan officers more control over their mortgage business. They get to be the boss and make all the decisions. 

The culture of mortgage brokering is all about independence and creativity, so loan officers can run their businesses how they want.

Unlike retail companies, mortgage brokerages value diversity and give loan officers the freedom to do things their way. Plus, being a broker-owner means even more control, the ability to make decisions and take risks on their own and develop their own business strategies. The only reporting is to regulatory authorities, which gives loan officers even more freedom. 

Overall, it's a great move for loan officers who want more control and flexibility in their career.

It's becoming more common for loan officers to leave the retail side and become brokers because of the many benefits it offers.

I think the retail side will step up their game too. They'll have to make changes to keep up with the competition and attract top talent.

In the future, being a retail loan officer will become more appealing again. Right now, being a broker-owner or working for a brokerage is more attractive, but I think that'll change. Retail lenders will come up with new and unique value propositions to make the job more appealing.

One thing is for sure, retail lenders aren't going to just disappear and let mortgage brokers take over the industry. Instead, there will be a healthy competition between the retail and broker models that will make the industry better for everyone.

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The Empower Team

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