Mortgage Brokers are Needed More than Ever
Aubrey Clark
August 11, 2008
In today´s market banks and mortgage lenders are being extremely cautious about which loans they approve. Real estate values are dropping and foreclosure rates are rising, and many banks are dropping out of the mortgage business all together. Gone are the days when banks could sell their loans on Wall Street, reload, and do it again. Banks are now faced with the reality of having to actually hold on to their loans like they did in good ole days. This means that they want to make sure that the loans they make at this time are good loans that will pay them back on time.
Nowadays, it seems like all we ever hear about, in reference to mortgage brokers, are the bad brokers; the ones that make headline news and are carted away on TV in handcuffs. What these stories fail to report, is that the bad mortgage brokers make up less than 1% of all the brokers that are licensed in America. In fact, it has always has been the mortgage brokers that have advocated for tougher licensing guidelines, not the banks. They have always argued that by tightening licensing guideline they can eliminate the ´bad brokers" that give legitimate brokers a bad reputation.
What columnist and reporters fail to mention in their stories is the indispensible service brokers perform in the marketplace. For instance, each bank tends to have their own, distinct, personality when it comes to approving loans. Knowing these "personalities" is where brokers really begin to benefit their clients. Brokers have working relationships with almost every kind of lender imaginable and know each lender´s uniqueness, rates and approval thresholds. This way, they are able to place your loan with the best investor the first time, saving their clients time and money.
Most brokers also have working relationships with the underwriters that work for these lenders as well. This doesn´t mean that they can get bad loans through the system; but it does mean that they can help underwriters see the glass half-full as opposed to half-empty while they are underwriting your loan. In today´s market, almost all mortgages are considered "marginal" and scrutinized by underwriters, having someone on your side is an invaluable asset.
One of the biggest selling points using a broker is personalized service. "So what, all I need is a good rate" is the response I have had from some customers in the past, but consider this. As opposed to brokers, when you submit your loan application to one of the large banks, your loan becomes a number and is pushed through the system as if it was on an assembly line. The monolith lenders usually have a person at the bank accept your application who will never see the loan package again. Those of you that have used the large banks know what I mean, those of you who haven´t, I suggest you try this exercise before committing to a larger lender.
Pretend you have just submitted a loan application a week ago with one of the large lenders. Let´s assume that you have forgotten to give the loan officer a key piece of information that can really help with your approval. Call their 800 number and try to find the right person to give this to so that the underwriter can consider it when approving your loan. This should answer the question, "Why do I need good service." Another misconception many people have is, that you actually have to pay more when using a broker because they are the infamous "middle man."
Nothing could be farther from the truth, in fact, most brokers can offer lower pricing than larger banks nine out of ten times. This is because, much like manufactures, money has a retail cost and a wholesale cost, and brokers get the wholesale pricing. Banks have to charge retail for their money because of the added expense it takes to close mortgages. They have to pay loan officers, processors, underwriters and many more expenditures that are involved with closing a loan. Simply put, their overhead is higher than most of the brokers, which results in lower pricing for you. Keep these facts in mind the next time you read an article about "crooked brokers" and remember, honest brokers don´t sell newspapers but they can save you time and money.
Aubrey Clark is an Author and editor for Direct Banc, a directory of Low Interest Cards, specializing in credit cards for fair credit. Aubrey is a native of Destin, Florida but now lives in Atlanta Georgia since 1999 with his wife and four children. This article may be reprinted without permission as long as the author credits and links remain in place.
Nowadays, it seems like all we ever hear about, in reference to mortgage brokers, are the bad brokers; the ones that make headline news and are carted away on TV in handcuffs. What these stories fail to report, is that the bad mortgage brokers make up less than 1% of all the brokers that are licensed in America. In fact, it has always has been the mortgage brokers that have advocated for tougher licensing guidelines, not the banks. They have always argued that by tightening licensing guideline they can eliminate the ´bad brokers" that give legitimate brokers a bad reputation.
What columnist and reporters fail to mention in their stories is the indispensible service brokers perform in the marketplace. For instance, each bank tends to have their own, distinct, personality when it comes to approving loans. Knowing these "personalities" is where brokers really begin to benefit their clients. Brokers have working relationships with almost every kind of lender imaginable and know each lender´s uniqueness, rates and approval thresholds. This way, they are able to place your loan with the best investor the first time, saving their clients time and money.
Most brokers also have working relationships with the underwriters that work for these lenders as well. This doesn´t mean that they can get bad loans through the system; but it does mean that they can help underwriters see the glass half-full as opposed to half-empty while they are underwriting your loan. In today´s market, almost all mortgages are considered "marginal" and scrutinized by underwriters, having someone on your side is an invaluable asset.
One of the biggest selling points using a broker is personalized service. "So what, all I need is a good rate" is the response I have had from some customers in the past, but consider this. As opposed to brokers, when you submit your loan application to one of the large banks, your loan becomes a number and is pushed through the system as if it was on an assembly line. The monolith lenders usually have a person at the bank accept your application who will never see the loan package again. Those of you that have used the large banks know what I mean, those of you who haven´t, I suggest you try this exercise before committing to a larger lender.
Pretend you have just submitted a loan application a week ago with one of the large lenders. Let´s assume that you have forgotten to give the loan officer a key piece of information that can really help with your approval. Call their 800 number and try to find the right person to give this to so that the underwriter can consider it when approving your loan. This should answer the question, "Why do I need good service." Another misconception many people have is, that you actually have to pay more when using a broker because they are the infamous "middle man."
Nothing could be farther from the truth, in fact, most brokers can offer lower pricing than larger banks nine out of ten times. This is because, much like manufactures, money has a retail cost and a wholesale cost, and brokers get the wholesale pricing. Banks have to charge retail for their money because of the added expense it takes to close mortgages. They have to pay loan officers, processors, underwriters and many more expenditures that are involved with closing a loan. Simply put, their overhead is higher than most of the brokers, which results in lower pricing for you. Keep these facts in mind the next time you read an article about "crooked brokers" and remember, honest brokers don´t sell newspapers but they can save you time and money.
Aubrey Clark is an Author and editor for Direct Banc, a directory of Low Interest Cards, specializing in credit cards for fair credit. Aubrey is a native of Destin, Florida but now lives in Atlanta Georgia since 1999 with his wife and four children. This article may be reprinted without permission as long as the author credits and links remain in place.
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