Vertical Lend News - Partners or Competitors? Some believe brokers need to be working with financial planners to survive.

Some advocate taking the education and licensing steps to become a financial planner while others believe establishing alliances with financial planners is the way to go.

Expanding one's horizons from simply originating the mortgage is more important than ever. Financial planners are more than ever moving into the origination side of the mortgage business, taking advantage of that position of trust they already have with their client.

An Atlanta-based group, The Mortgage Institute for Financial Services Professionals (MIFSP), is offering training for financial planners to be able to offer consumers guidance in analyzing their mortgage financing options and in making homebuying and mortgage decisions consistent with their financial goals.

Leon Morris, executive director of MIFSP, said, "There is no where for consumers to turn for credible independent personalized mortgage advice." He had been in the financial services profession for 15 years when he became a mortgage broker as well.

"During the past five years, I have come to realize that even though most people finance and refinance homes many times during their lifetime, they never fully understand the mortgage loan process and simply trust that the lender or mortgage broker is providing the 'right' loan for their particular situation," Mr. Morris explained."

Training Financial Planners

MIFSP founders claim there is no place for consumers to go to get independent personalized mortgage advice.

Everett Abney, MIFSP educational consultant, added, "Consumers should be able to find professional independent assistance, if desired, in deciphering the myriad of mortgage loan programs available and in quickly analyzing loan cost disclosure documents."

For those financial planners looking to become involved in originating mortgages, there are a number of firms out there willing to help.

Melville, N.Y.-based Vertical Lend markets its services to financial professions such as financial planners, tax preparers, insurance agents and accountants.

Financial planners interested in originating mortgages, said David Peskin, president of Vertical Lend, become an affiliate with the company either through a 1099 or a W-2 employee arrangement.

They are loan originators for Vertical Lend and do not need to have a mortgage broker's license (although some states do require individual mortgage lender employees to be licensed or registered).

While these people perform all the traditional functions of a loan officer, they are also assigned an individual account executive at Vertical Lend to help discuss product needs of their clients.

This system also leads to ongoing training for these financial professionals, Mr. Peskin noted. When they first sign up with Vertical Lend, they go to a seminar to learn about originating loans.

The in-house account executive and the financial planner discuss the possible loan scenarios based on the planner's intimate knowledge of the customer's long- and short-term financial needs.

Recognizing that mortgages are not the financial planner's main area of knowledge and that each customer is different, Vertical Lend set up the system where each case is gone over with the account executive, Mr. Peskin said.

The idea behind the program with financial planners goes back to his days as a loan officer. When working out a loan scenario with the applicant, "A majority of my clients would say I need to discuss this with my financial planner or CPA."

It also worked the other way, as these financial professionals would come to him saying they had a client who needed a mortgage.

The big impetus was the changes to the Glass-Steagal laws that removed the barriers between banks and financial services, he said.

Mr. Peskin agreed that many consumers are looking for a "one-stop shop" for all of their financial needs and that financial planners are willing to give it to them. He met with one for personal reasons and this person told him, "I am that guy who will analyze your entire life."

What is important is that "there is a trust factor there" with the financial planner, Mr. Peskin said. Who is better to talk about a mortgage with than a financial planner or certified public accountant that already has a relationship with the customer and is looking out for the client's best needs?

Approximately 35% of Vertical Lend's business comes from financial planners and that number is growing every year.

Eventually 5% of the overall origination market, he said, could come from financial planners. It is important for this group to diversify its business because banks are moving onto their turf, he said. An example of this is J.P. Morgan Chase, which has a radio advertisement promoting its financial planning and consumer banking services together.

Another company that works with financial planners and accountants is IMC Direct, a unit of Independent Mortgage Co., Anaheim, Calif. The national marketing director of IMC Direct is Denis M. Kelly.

Previously, Mr. Kelly had worked for RLI Mortgage Services three years ago. RLI and Taylor Bean & Whitaker came together to try and market mortgage products through insurance agents.

They quickly learned that would not work. But as the program moved forward, it attracted interest from financial planners and accountants, and Mr. Kelly said, they found these were the people to go with.

RLI Mortgage Services dissolved and during the process it looked at a number of companies and found Independent to be the right fit. That move took place about a year ago.

Like the Vertical Lend program, those participating with IMC Direct become part-time W-2 employees, and there is an in-house expert for them to work with to find the right program for the financial planner's client, Mr. Kelly noted.

Other companies have tried to work with this niche, but they had "fizzled out," he explained, because "they tried to make these people mortgage people and it just doesn't work."

The financial planner takes the application in his or her office. Processing is done at IMC Direct's Las Vegas mortgage center. The center works with the planner or accountant to fill in any gaps. When completed, the package including the application disclosures is e-mailed back to the financial planner.

"We tried to streamline and simplify [the process] but in the mortgage industry you can only do that so much," Mr. Kelly said.

The IMC Direct program, he continued, allows financial planners and accountants to be compensated for something they were doing for free.

Many times, when one of their clients wanted a mortgage, the client would go to the financial planner or accountant and ask what type of loan they should get. "They were already consulting free of charge," he said, adding that the program allows financial planners and accountants to take it to the next level.

For the client, since the financial planners main business is not originating mortgages, the borrower will get "unbiased advice." The result is the financial planner "would not push someone into a product that is not the best for their needs," nor would IMC Direct want that either, Mr. Kelly said.

In terms of product, IMC Direct sees a fair amount of conventional loans, but also gets a lot of niche products and subprime loans as well. A popular product this fall as rates are rising is the Interest Only loan.

However, IMC Direct realizes that each financial planner has his or her own approach as to what is the best interests for their client and thus the company does not dictate to them on which product must be offered.

Speaking of products, during October, Vertical Lend entered into an arrangement with the nation's largest servicer of reverse mortgages, Financial Freedom Senior Funding Corp., Irvine, Calif., to offer those loans products.

The structure of the reverse mortgage product, David Peskin said, is similar to estate planning and financial planners have the expertise to best analyze the needs of their senior citizen clients in this area.

Reverse mortgages, he continued, "are a way for a financial planner to diversify his business."

This comes just one month after Vertical Lend announced a partnership with DeepGreen Bank, Seven Hills, Ohio, to offer home equity lines of credit.

© 2003 Thomson Media Inc. All Rights Reserved.