Hornik says capital providers are now vetting deals one at a time, and brokers who keep pushing bad loans are going to lose their lender relationships
The private lending space has been through credit cycles before. In the past, mortgage brokers with strong lender relationships could get a less-than-ideal deal approved based on that strong relationship.
However, it appears that things have changed, at least in the current credit cycle. Capital providers are now scrutinizing each deal coming across their desk, even if it is with a broker who has been a trusted partner for years.
According to Jonathan Hornik (pictured top), a founding member and owner of the NPLA, brokers can’t assume a package of good deals will allow a bad one to slide through the approval process.
Hornik made that shift one of the centerpieces of his opening remarks at the conference on Tuesday. He said brokers need to make sure they know what to expect when taking deals to lenders.
"For those of you who are brokering deals, you have to understand the landscape because it's changed," Hornik said. "Your lenders, your capital providers are looking at business purpose lending more critically today than they've ever looked at it."
The end of relationship capital
Brokers used to have a little more leeway, especially those who regularly brought good deals to the table, Hornik said. Capital providers rarely reviewed individual loans after origination, but he noted that operating model has changed.
At the conference, he asked for a show of hands from capital providers now discussing loans on a loan-by-loan basis with their capital partners. Representatives from Toorak Capital Partners, RCN Capital, and D2 Capital Advisors, among others, raised their hands.
"It used to be years ago they didn't care what you were closing because you had reps and warranties in your forward flow MPLA agreements," he said. "You would send the stuff over, and you would never hear from your capital providers. Today, capital providers are looking at loan-level data for the first time."
For brokers, the old dynamic of bundling a weak deal with strong ones and leaning on the relationship to push it through is gone. Lenders are no longer willing to absorb a bad loan in exchange for volume.
"There's no more asking your credit providers, 'Just close it for me. I know this isn't a good loan, but I'm sending you 10 other good ones,'" he said. "That doesn't work in 2026. Each loan needs to be underwritten to acceptable standards and credit criteria. If you're not doing that as a broker, you're not going to be welcome for the lenders here who only want to survive the credit cycle."
Hornik's message to brokers was to stop thinking about satisfying the borrower and start thinking about preserving the lender relationship.
"Don't think about pleasing your borrower who's pushing a bad deal," he said. "Think about losing your credit provider who is aligned with you in interest and continuing to do business."
Margin discipline and market convergence
As part of his opening remarks, Hornik outlined three concepts he said brokers and lenders need to keep in focus for the second half of the year.
The first is margin discipline. As the credit cycle matures, the lenders who survive will be those who held their underwriting standards regardless of competitive pressure, Hornik said.
"Those who maintain their margin discipline will make it," he said. "Those chasing volume — those going to 100% advance rates, those lowering and undercutting pricing — I promise you, you will not be around to participate in the NPLA in years to come because we've seen the story."
The second is market convergence. Non-QM and consumer lenders are crossing into DSCR and even RTL products, Hornik said, raising questions about whether they are applying the same standards that business purpose lenders have developed over the years.
"Crossover can hurt this space because it's sloppy when somebody doesn't know what they're doing," he said. "It could be fatal. This is something that we are taking a careful look at."
The third is the NPLA's Industry Watch List, a shared database of borrowers that member lenders have declined to work with again. Hornik described two cases where the list surfaced problems before a deal closed. He said the list isn’t there to specifically tell lenders who they can’t work with, but who should get extra scrutiny before you make that decision.
"It is a tool you all should be using," he said. "It is improving the quality of underwriting in the space."
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