Helpful Consumer
Information from the
National Mortgage
Brokers Association (NAMB)
Tools for Home
Buying
Why should
you use a mortgage broker?
Did
you know that two out of three Americans use a mortgage broker to
purchase a home? They do this because mortgage brokers offer home
buyers with more options and a wider selection of loan products.
Read How Do You Know Your Mortgage Broker Is an Expert?
to learn how you can find the best mortgage broker for you. Also,
be sure to read these Steps to Take Before Buying a
Home.
Mortgage
brokers help save money!
The
new Georgetown University Credit
Research Center Study shows how mortgage brokers
help save money by helping home buyers lower their annual
percentage rates.
Find out
about reverse mortgages!
Notes
on Reverse Mortgages, from NAMB's
President, Bob Armbruster, recent appearance on the Today
Show.To
see this vital information, click here.
Have a
complaint? Check out what you should do.
Have
you experienced a problem working with a mortgage broker? Click here.
Consumer
Focus
NAMB'sstrategic
partnership with Focus Publications gives members complimentary
access to valuable information. Consumer Focus includes a
monthly consumer economic update, a monthly consumer housing
report, consumer-related articles, and other resources and links to
consumer oriented Internet sites.
_____________________________________________________________________________________________________
Frequently
Asked Questions
Why choose a
mortgage broker?
Two out of three Americans do. Brokers provide consumers
with:
- 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 boards. NAMB supports
reasonable and fair state and federal regulation of mortgage
brokers and lenders. The industry is regulated by 17 federal laws
and numerous state and federal regulations.
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:
- reputation for
service
- underwriting
criteria
- ability to fund a
loan on time
- compliance with
consumer's requirements
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.
