Mortgage Brokers Do Good Work and Provide Value

I am not just saying this becuase I am in the business. I know that where I work we’re upfront, honest and very transparent. Clients flock back to us. They rarely say anything bad and 99.99% of the time time they are geniunely happy!

There are bad apples out there. How do you know when you’re dealing with one? Well, here is what Dr. Jack Guttentag, Professor of Finance Emeritus at the Wharton School of the University of Pennsylvania has to say.

What makes a mortgage broker “upfront”? Upfront mortgage brokers tell you, before you retain them, how much they are charging for their services. Other brokers don’t.

Mortgage brokers work hard for their money. They don’t make loans — that’s what lenders do — but they do most of the work leading up to a loan. Among other things, mortgage brokers:

Find prospective borrowers, to whom they quote prices and other terms.

Counsel prospects on appropriate loan programs and find one or more lenders who offer the desired programs.

Qualify prospects against lender requirements and take their applications.

Have the selected lenders lock (finalize) the loan prices.

Get properties appraised and credit scores checked.

Send letters to verify employment and income.

Provide legally required disclosures.

Increasingly, use automated underwriting systems to get the borrower’s application approved on the spot.

Pull together the complete file of documents that will be handed off to the lender for final checking and funding.

While it seems perfectly evident to an outsider that mortgage brokers are service providers, they don’t see themselves in that way. In their own eyes, they are loan providers, meaning merchants.

It is an important distinction. Service providers tell their clients what their fee is before any services are rendered, but merchants don’t. “Wal-Mart doesn’t tell you how much they make on your coat,” says the broker. “Why should I tell you how much I make on your loan?”

The illogic of this — brokers don’t actually buy or sell anything — doesn’t faze the broker because logic has nothing to do with it. What matters is that brokers can make more money as loan providers who don’t reveal their compensation than as service providers who do.
Brokers who are not upfront mortgage brokers make their money by adding a markup to the prices they receive from wholesale lenders.

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This site is for informational purposes only. It is not sponsored or in any way affiliated with the government. If you are in need of a mortgage loan, consult with a licensed mortgage professional. All fair housing and equal housing opportunity laws apply when applying for a mortgage or buying a home. Copyright 2012.