Is there hope for the mortgage broker?

Question

I have been an assistant to a mortgage broker for the past 2 1/2 yrs. Because I've worked for a very good mortgage broker (who actually finds the best rates to the borrower at the lowest price possible) I find it difficult to see good people like my boss become extinct due to bad brokers out there.

Indeed, I do believe that bank mortgage executives (& account executives) and underwriters are to blame for allowing the stated income/stated assets to have gone to far. Indeed, I feel that the banks should have questioned "obviously" inflated stated incomes by running a search from places like salary.com

NOW I feel that the mortgage banks will create a monopoly to charge WHATEVER they want to the borrower since they know that people are no longer going to brokers. At the same time too, I feel that banks should have asked why certain borrowers were applying for mortgages with predatory characteristics.

I believe that if broker lending laws were to require the wholesale banks to 1) require an audit to stated income programs, 2) require an interview with the borrower only when the mortgage program possessed predatory characteristics, 3) that brokers not be allowed to make more then 2-3 points per file, 4) that a bachelor's be required to become a mortgage broker be required. With all this in mind I see no reason why the mortgage broker should disappear.

Let's not forget that the way that Brokers make business is by getting wholesale rates from banks like Wells Fargo, Bank of America, WAMU, Citi, and so on. Bank of America HAS ALREADY shut down their wholesale program and is going strictly retail.

I assume that the other banks will go retail as well. What are your thoughts.

Answer 1

I don't think mortgage brokers will disappear; insurance brokers (independent agents) have not disappeared either.

there is value to be added in educating buyers and searching through many mortgage offerings for the best fit for this buyer and independent mortgage brokers will continue to fill that role.

that said -- there do seem to have been abuses and it seems likely that Congress is going to fix some of them [plus make a mess of some things that don't need fixing -- after all, this is Congress].

One very likely change will make the broker legally an agent of the buyer and thus accountable to the buyer for finding a "good" deal. [And thus subject to suit for illegal actions and failing to look for the best deal.]

Another might require mortgage brokers to disclose their entire income from all sources on each deal to the buyer. [Although insurance agents do not have to do this, so it may not happen.]

***
I suggest that your future strongest competition will be from internet sites. Their low cost model will let them cut fees and loudly proclaim that fact.

GL

Answer 2

Unfortunately there are a large number of Mortgage Brokers out there who are extremely dishonest. It certainly is a shame if you were with one of the few honest Mortgage Brokers out there.

I am a sophisticated investor with over 40 years of investing in real estate and I almost got swindled by a dishonest Mortgage Broker just several months ago when I refinanced my home.

Essentially the Mortgage Broker pulled a "bait and switch" on me. The Mortgage Broker promised me a very low rate then tried to switch me to a very high rate at the sign off.

I cancelled the transaction and went back to my bank where I have my checking and savings accounts and got the original rate that my bank had promised me.

If Mortgage Brokers are going to survive, the must eliminate the crooks and the incompetents from their midst.

The public cannot do that for the Mortgage Brokers. The Mortgage Brokers will have to do that for themselves,

(edit to the first responder)

The Mortage Broker that I used was an internet broker. I would say the internet opens the Mortgage business up to more abuse because the internet broker knows that he will never see this customer again.

At least the local mom and pop brokers have more motivation to be honest because they have the possibility of repeat business. The online brokers just take the money and run. They do not reduce costs. They try to grab as much money as they think they can get away with.

That was my experience.

.

Answer 3

Lets not forget about the wonderful REALTORS, where the majority of the "steering" actually happens. How often does a realtor try to pursuade a client to buy a home that is more than the customer feels comfortable with so they ultimately can make a larger commission? Also, the mortgage broker/banker makes far less commission than the total realtor commissions in a transaction. If the consumer thought of REALTOR commission in POINTS rather than percentages, (typically up to 7 points plus junk feesper sale), the realty industry would come to an abrupt halt. My suggeston to the NAMB (National Association of Mortgage Brokers) was to propose that a cap of 2% in realtor commissions be put on any home that has sold in the previous four years. Didn't get a response back from them yet. Just think, if that cap were instituted, it would immediately give a 5% correction to help offset declining home values across the country.

Answer 4

In all honesty, it rather will depend on what your problem is. If you may have first-rate credit score, a low debt to earnings ratio, and watching for a mortgage inside the normal price range, both approach is quality to move. A financial institution that you're presently utilizing (or principally a credit score union) could have similar premiums and often no or low origination charges. Their premiums will frequently be approximately the equal as you'll be able to get somewhere else. However, if in case you have a couple of credit score blemishes or wish a recounted earnings mortgage or there are another disorders, I could absolutely cross with a mortgage officer or loan dealer simply on the grounds that in their capability to entry wholesale premiums and, realizing the enterprise good, being equipped to uncover the fine software for you and your exact problem. You is also equipped to get a larger cost or get authorized for a mortgage that you just do not have been equipped to instantly. There are professionals and cons to each, however the predominant factor is to uncover anybody that you just believe and feel has your fine pursuits at center. There are few matters worse than getting a shock at last that you just can not repair on the grounds that you handled a unethical man or woman. Best wants.

Answer 5

This cycle repeats over and over again. This is one way for people to learn to live within their means. There is no way to avoid it. The people that over reached for a bigger house than they could afford are benefiting in two ways.
1. They will be more careful next time
2. They are serving as an example for others.
Your broker will work at something else until the mortgage business starts back up again.

Answer 6

The good brokers are still doing very well. People are still buying. It is only the brokers not well regarded in their RE community that are having trouble.