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Why use a Licensed Mortgage Broker or Lender ?
Did you know that more than 65% of all home
loans in the United States are originated by
mortgage brokers?
Whether it's purchasing a first home, taking
advantage of a refinancing opportunity, or
buying that vacation home that is always dreamed
of, a mortgage broker is a wonderful resource to
turn to for all of your home loan needs.
A mortgage broker
is also an independent contractor who markets
and originates loans offered by several
wholesale lenders. By offering superior market
expertise, and direct access to many different
loan programs, a mortgage broker provides the
consumer the most efficient and cost-effective
method of obtaining a mortgage that fits the
consumer's financial goals and circumstances.
Mortgage brokers originate more mortgages than
any other single loan source group in this
nation.
A mortgage broker
is an independent real estate financing
professional who specializes in the origination
of residential and/or commercial mortgages.
There are approximately 44,000 active mortgage
broker and lender operations across the nation
that employ an estimated 360,000 people and
originate two out of three of all residential
loans in the U.S. The expansive mortgage broker
network allows loan wholesalers of all sizes to
immediately gain a national presence without
incurring the great expense of national
advertising and maintenance of branch offices.
Why two out
of three Americans choose a licensed mortgage
broker or lender:
-
Choice
-
Convenience
-
Expertise
The consumer
receives an expert mentor through the complex
mortgage lending process. The broker offers the
consumer extensive choices and access to
affordable home loans while balancing the
consumer's financial interests and goals.
Have
more Americans been able to buy homes because of
mortgage brokers?
Yes! Mortgage
brokers have pioneered the subprime credit
market, using innovative loan packages to allow
low-to moderate-income
borrowers, with less than perfect credit
histories, to start enjoying the benefits of
home-ownership. Many low income borrowers with
less than perfect credit histories would not
have been able to purchase their dream home
without the assistance and dedication of a
mortgage broker.
Are
mortgage brokers lenders or bankers?
Neither. A broker is a real estate financing
professional acting as an independent
contractor. The range of products and services
offered through brokers, and by brokers, is
evolving rapidly. There are circumstances when
brokers may act as bankers, funding their loans.
However, the majority perform origination
services up to the point of funding.
Does
the mortgage broker really care about the
quality of the loan itself?
Yes, absolutely. The safety and soundness of the
mortgage lending community is directly linked to
the success and integrity of its home loan
originations. Furthermore, mortgage brokers
represent the single largest residential
origination source today, emphasizing that they
play a significant role in the mortgage loan
process. These numbers highlight the fact that
consumers who exercise their choice, choose
mortgage brokers; most likely because brokers
are dedicated to their customers: consumers,
wholesale lenders, and ultimately, American
taxpayers.
Should
brokers be regulated?
Brokers are regulated by several federal laws
and regulations and dozens of state laws and
licensing entities.
What
role does the broker pay versus the wholesale
lender?
The wholesale lender underwrites and funds the
home loan, may service the loan payments, and
ensure the loans' compliance with underwriting
guidelines. The broker, on the other hand,
originates the loan. A detailed application
process, financial and credit worthiness
investigation, and extensive disclosure
requirements must be completed in order for a
wholesale lender to evaluate a consumer's home
loan request. The broker simplifies this process
for the borrower and the wholesale lender, by
conducting this research, counseling consumers
on their loan package choices, and enabling them
to select the right loan for their home buying
needs.
The mortgage loan
process can be arduous, costly, and seemingly
impossible to the consumer. The broker works as
the liaison between the borrower and the lender
to create a cost effective and efficient loan
process.
Do
brokers work for the wholesale lender or the
consumer?
Neither. As an independent
contractor, the broker allows wholesaler lenders
to cut origination costs by providing such
services as preparing the borrower's loan
package, loan application, funding process, and
counseling the borrower. Brokers help keep loan
rates low due to their minimal overhead and
setup costs. Furthermore, the broker will seek
the loan which best suits the borrower's
financial circumstances, needs and goals.
From the consumer perspective, with rare
exception, the broker does not get paid unless
and until the loan closes. Thus, the
broker has the ultimate incentive to provide the
best possible customer service to the consumer.
Isn't
the broker supposed to get the best deal for the
consumer?
Since mortgage brokers offer the products of
many wholesale lenders they often can offer
consumers a wider selection of loan products.
This question presumes that anyone can know what
is "the best deal." While many would consider
"the best deal" to mean "the lowest rate," a
loan program with a very low interest rate may
not be the best choice for a consumer with
limited cash, if that rate comes with high
points and fees. A 15-year loan may save a
borrower tens of thousands of dollars in
interest payments of a 30-year loan, but the
higher monthly payments may be acceptable to the
consumer. So, "the best deal" for any consumer
depends on his financial circumstances, needs
and goals.
Today
over two-thirds the nation's mortgages are
originated by mortgage brokers. This clearly
indicates that
consumers are choosing the superior options,
service, and expertise offered by mortgage
brokers. Brokers have forced retail lenders to
compete with other loan sources driving down
costs nationwide.
Don't
brokers "steer" consumers to the wholesale
lender who pays the highest fees to the broker?
While isolated instances of adverse steering can
occur, the mortgage brokerage industry has
predominantly armed consumers with a free-market
economy weapon: open and vigorous competition.
Any consumer exercising his or her basic right
to shop and compare, will ultimately find the
loan options that are in his best interests. The
combination of government-mandated disclosures
and vigorous competition has presented today's
consumer with unprecedented levels of choice.
While price is an important consideration in
advocating a specific wholesale lender, brokers
also make their professional recommendations
based on a number of other factors which include
the lender's:
Why do
brokers collect fees from both the consumer and
the lender? Isn't this a conflict of interest or
a duplication of charges prohibited by RESPA?
RESPA allows fees to be charged between
settlement service providers, as long as those
fees are reasonable for services, goods, or
facilities actually provided. Mortgage brokers
provide the same services to consumers as do
retail loan offices that typically charge the
consumer an origination fee. These services
include: taking the application, obtaining the
credit report and appraisal, counseling the
consumer on the loan process, and collecting the
necessary documents. Brokers also provide
separate and distinct services and facilities to
wholesale lenders. These include marketing the
lender's products and assembling and delivering
the completed loan package.
In
addition, lenders may pay brokers a premium --
"yield spread premium" or "service release
premium" -- which may include compensation for
the services and facilities, but also represents
payment for the intrinsic market value of the
closed loan. All of these are legal
compensation. It is important to remember that
regardless of which party compensates the broker
(lender or consumer), in almost all cases the
broker receives nothing until the loan closes.
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