Most borrowers don't realize that the guy (or gal) who helped them obtain their mortgage isn't really the lender. More often than not, he's a mortgage broker. The lender is the company that puts up the money. The broker is the one who helps you fill out the loan application, makes sure you qualify, and hunts down a good rate, the best deal or perhaps the best service. In other words, he does all the work, but someone else actually funds the mortgage.

Obviously, this isn't always the case. Many lenders have people who on their staffs who do what independent brokers do. But a new study to be released later this month has found that the mortgage brokerage business is now five times larger than it was just 15 years ago. And half that jump occurred within the last three years.

"That's dramatic for any industry," said Tom LaMalfa, a principal in Wholesale Access, a Columbia, Md., research and consulting firm that has been following the brokerage field for more than a dozen years.

Despite the spectacular growth, though, mortgage brokers' portion of the origination market slipped a bit from the 69 percent share the company said brokers controlled in 1998. According to LaMalfa and his partners,

According to preliminary results, brokers produced 65 percent of all home loans last year.

But that still amounts to a total industry-wide volume of $1.625 trillion, the company reported at the National Association of Mortgage Brokers convention in Baltimore recently.

Originations from retail and non-bank operations totaled just $875 billion in 2002, they said.

David Olson, another principal in the firm, called the size of the business "a major finding," especially considering there is no other data being collected to indicate the size of the business.

"They dominate," Olson said of brokers. "But the Department of Housing and Urban Development still has no numbers. This is quite an industry not to be tracked by the federal government."

LaMalfa also chided HUD for not having a better understanding of brokers' role in the nation's housing finance network, especially since Sec. Mel Martinez is trying to change the way they operate.

"This is an industry that's holding up the entire economy and we don't know the size of it," he said. "When HUD considers meddling with brokers, they should ask themselves how all these refinancings would get down without brokers."

The study, the sixth by the Maryland company, estimates there are "at least" 44,000 brokerage firms that are now actively making loans and perhaps as many as 45,000 or 46,000.

In 1988, when the first study was completed, Wholesale Access counted just 8,500 firms. Ten years later, there were 36,000.

Despite the phenomenal growth, though, the typical firm produced only $38 million in mortgages last year, about the same as in 2000.

"Most of the growth came from an increase in the number of brokers and relatively little came from an increase in volume," a third partner, Larry Pearl, reported.

The preview presented at the NAMB meeting included these other findings:

Published: July 2, 2003

Use of this article without permission is a violation of federal copyright laws.