Smart lenders know brokers are critical partners, not just conduits for deal flow.

The current lending landscape is as competitive as ever. Combined with growing concerns over a potential recession and what seems like a constantly fluctuating bond market, rising mortgage delinquencies continue to threaten the overall health and stability of lenders.

Spikes in interest rates, fluctuations in property value, and shifting borrower behaviors have increased the risk of early payment defaults and the rate of long-term delinquencies, adding pressure on asset managers to continue maintaining a high-performing portfolio. Although many believe these issues could be resolved through tighter lending guidelines or underwriting, a more effective response may be through strategic, collaborative efforts between brokers and lenders.

Broker Value

Lenders can provide a vital source of financing in the private lending space, but their product offerings are often limited in scope. Mortgage brokers, by working with multiple lenders, can provide real estate investors with a broader range of financing options. Therefore, mortgage brokers are in a unique position to determine the quality of the investment scenario, boost transparency, and set investor expectations.

Importantly, such a direct role gives them significant influence over loan performance, not only at the time of origination but throughout the loan lifespan. Lenders can strengthen broker relationships by empowering brokers to serve as the investor’s single point of contact. By leveraging the broker’s direct interaction with investors, lenders can gather valuable feedback, implement targeted adjustments based on that feedback, and use strategic incentives to improve portfolio performance and minimize risk.

Mortgage brokers provide significant value to lenders, far beyond simply acting as intermediaries who connect the dots between lenders and consumers. They serve as essential partners who can help bridge the gap between product and real estate investor needs. This not only saves both investors’ and lenders’ time and money (and the stress of finding an appropriate solution) but also often ensures a smoother and more reliable loan origination and, ultimately, loan performance.

Post-Origination and Beyond

Through multiple, already-established networks between lenders and investors, brokers are best equipped to quickly assess an investor’s needs and product offerings. Through their understanding of the market, investor circumstances, and accessibility to a broad set of lending products, they can pair investors with the right loan while filtering out those who may not meet a lender’s credit criteria. This front-end due diligence ultimately reduces unqualified submissions, a lender’s operational costs, and the risk of potential early payment defaults and eventual delinquencies.

More experienced and established brokers usually operate at higher volumes and maintain steady pipelines of qualified investors, helping lenders stabilize monthly revenue and volume. Their ability to source quality leads through their various networks makes these broker relationships even more critical during periods of economic downturn or housing market corrections.

Similarly, because brokers are driven by volume by client satisfaction and successful closings, they tend to gravitate toward lenders who are consistent and reliable and offer competitive products.

As the broker-lender relationship strengthens over time, it often leads to more streamlined operations—reducing closing times and ultimately creating a better experience for brokers, lenders, and borrowers alike. Ongoing, active engagement with both lender and investor throughout the entire loan life cycle—well beyond origination—significantly drives stronger portfolio performance and greater satisfaction for lenders and investors.

For many investors, the loan process itself can feel overwhelming, especially given the different lending products available. Brokers take the approach of being an early educator: They break down complex loan terms, explain required documentation, and simplify investor financial requirements. By setting realistic expectations up-front, brokers decrease the likelihood of unexpected conditions in underwriting, usually leading to cleaner applications and better conversion rates.

With enough time and experience, brokers eventually become more skilled at spotting red flags early in the application process. From noticing discrepancies in financial documentation to sensing potential misrepresentation from the prospective investor, brokers should be able to identify issues before they are eventually discovered during underwriting. Although unseen by lenders, the pre-diligence work brokers complete before submitting a loan is essential to protecting lenders against fraud and mitigating risk.

As brokers continue to cultivate their relationship with clients, the trust and connection that is fostered provides an opportunity not only for repeat business and referrals but also for potential issue resolution and support. If an investor encounters any financial hardship, property, or tenant-related issues, they may be more likely to reach out to their originating broker rather than directly to the lender or servicer. This positions brokers to play a unique role in facilitating early communication between troubled investors and lenders, potentially resolving issues before they escalate into default, delinquency, or foreclosure.

Lenders can encourage this ongoing broker-client engagement by providing brokers with recurring reports on their originated loan performance. Such reporting should identify loans that are still due for the current month (following the end of the loan’s grace period), loans that have recently slipped into delinquency, and a summary of their currently open loan portfolio performance. The accompanying figure provides an example of such a report.

Such reporting should equip brokers with the information they need to reengage with potentially troubled borrowers and help prevent further delinquency. Although lenders often communicate directly with borrowers to address performance issues, they should first consider the existing broker-client relationship. Initial outreach about any outstanding issues should be escalated to the referring broker. It is critical that communication to the broker is clear and complete and includes a proposed resolution, enabling the broker to relay the message and required actions to their borrower.

In addition to maintaining low default rates, lenders can assess the performance of a broker’s portfolio across several key metrics. One important factor is file submission to origination volume. Although the exact volume will vary depending on the lender’s size and broker base, a strong-performing broker will maintain a consistent monthly flow of originations, with a high percentage—typically 80% or more—of approved submissions converting into funded loans.

Borrower credit quality is another critical indicator. A high-performing broker’s portfolio should include a large proportion of borrowers with strong credit profiles, typically reflected by FICO scores of 720 or higher, clean credit histories, prior real estate investment experience, and demonstrated liquidity.

The ability to manage file exceptions also speaks to a broker’s quality. Skilled brokers thoroughly understand loan programs and match clients to appropriate products rather than repeatedly requesting approval for loan structures that fall outside the lender’s established guidelines.

Finally, responsiveness and communication, while harder to quantify, are essential traits of a top broker. Effective brokers are consistently responsive to both client and lender inquiries, keeping all parties informed and engaged throughout the transaction process and through to resolution.

Monitor and Manage

For a lender, being able to evaluate and measure performance in all aspects of the business is essential. Although many of these metrics are centered on the origination of the loan (e.g., average cycle time, pull-through rates, cost per origination, fallout, profit), a lender’s need for reporting on lead sources and the performance of originations have equal importance. A lender’s loan origination system should capture and report which team originated the loan (inside sales vs. outside sales), broker, loan program/product, property type, original principal balance, origination date, outstanding principal balance, next due date, and current servicing status.

Data-driven tracking of payment defaults and delinquency trends by specific broker enables lenders to deliver timely coaching, performance feedback, or, when necessary, initiate disengagement discussions if a broker’s results fall outside acceptable limits. Although these limits can vary among lenders, a broker’s client base exceeding 20-25% delinquency across all their originations is generally cause for concern.

Maintaining these types of performance metrics allows lenders to provide brokers with actionable insights on how their clients are performing. This data supports informed conversations about the future direction of the relationship and helps identify opportunities for improvement.

Monthly reports further assist lenders in identifying both top-performing and underperforming brokers, while providing a clearer picture of how broker-originated loans impact overall portfolio performance.

The value-Add

The role of the mortgage broker in private lending is much broader than that of an intermediary, or even an originator. Strong, ongoing relationships for investors and better origination and loan portfolio performance for lenders are all ways mortgage brokers add value.