A recent study conducted by Polygon Research, with support from Willow Canyon Advisors and United Wholesale Mortgage (UWM), has concluded that the wholesale channel provides substantial savings for consumers on average across various mortgage verticals and within a standard reference loan profile.

Most notably, the study, which examined the most recently available 2023 HMDA data, found that consumers save an average of $10,662 over the life of the loan when working with an independent mortgage broker as opposed to a nonbank retail lender.

“As we’ve been saying for over a decade, the wholesale channel continues to showcase time and time again that it is the best place for a consumer to get a loan,” said Mat Ishbia, president and CEO at UWM. “This data further proves that when consumers work with an independent mortgage broker, they typically save thousands of dollars, and almost always have a faster, more seamless and personalized experience. The broker channel has seen tremendous growth over the last few years because of these direct consumer benefits. We don’t believe it is unrealistic for the channel to reach 50% market share and will do all we can to support our partners and educate borrowers.”

Borrowers are also seeing significant savings on average in upfront costs. For example, in 2023, a year marked by generation-high interest rates, home purchase consumers in the wholesale channel paid an average of 115 basis points upfront to obtain a 6.58% average interest rate, compared to 148 basis points upfront and a 6.60% average interest rate in the nonbank retail channel.

“For years, our own analysis has shown that mortgage brokerages supported by wholesale lenders provide consistently better value to consumers,” said Willie Newman, principal of Willow Canyon Advisors. “It’s exciting and validating to see that this is supported by an expert third-party research company, and that the 2023 results continue supporting the mantra ’brokers are better.’” Beyond the savings over the life of the loan, the study also concluded that veterans and minorities benefit significantly by going through the wholesale channel.

VA Loan Savings

On VA loans from non-bank lenders specifically, borrowers save an average of $13,432 per loan when working with an independent mortgage broker as opposed to a retail lender.

In addition, VA borrowers who obtained their loans through the wholesale channel received a 6.26% rate on average compared to a 6.40% rate from retail lenders and had to pay less than a percentage point (87bps on the loan amount) compared to the retail channel (106bps).

Serving Minority Borrowers

The wholesale channel also saw a higher percentage of home purchase loans originated to minority borrowers compared to the retail channel. In 2023, over 1.4 million loans were originated in Minority Majority Census Tracts (MMCT). Among non-bank lenders, the wholesale channel showed higher approval rates for all loans in MMCT (70%) compared to retail (58%), as well as non-MMCT (75% vs. 64% for retail).

“The research shows brokers not only offer better deals on average, but also excel in reaching minority communities, especially in times when affordability is a key concern,” said Jonathon Haddad, CEO of the Association of Independent Mortgage Experts (AIME). “The numbers in this study speak for themselves, and further underscore the importance of educating consumers across the country on the benefits of getting a mortgage with an independent mortgage broker.”

The high percentage of home purchase loans originated to minority borrowers through the broker channel highlights its crucial role in promoting homeownership among underserved communities. The study demonstrates that independent mortgage brokers, with their local presence and access to a wide range of loan products, are often better equipped than retail loan officers to understand and address the unique financial needs of minority borrowers, providing personalized guidance and support throughout the homebuying process.

Consumers looking to work with an independent mortgage broker should visit MortgageMatchup.com. For more information on how to become an independent mortgage broker, visit BeAMortgageBroker.com.

Study Methodology

To analyze these findings, Polygon Research utilized the most comprehensive mortgage lending data sets from the Home Mortgage Disclosure Acts (HMDA) and monthly agency single-family performance and MBS data, totaling over 5 billion detailed loan records with the most current data available as of March/August 2024, depending on the data set. Polygon blended HMDA data with FFIEC Census data to provide population patterns in the context of mortgage finance activity. All analysis is based on loan-level data.