Ask The Expert: Richard T. Cirelli

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The Case For Mortgage Brokers

Mortgage brokers captured 11.4 percent of the market the fourth quarter of 2011, the biggest share since the third quarter of 2010. According to National Mortgage News, brokers originated 11.3 percent of mortgage loans in the 2nd quarter of 2012. Last year’s 2nd quarter for brokers was only 6.7 percent.  That’s a 69 percent increase! Mortgage brokers once dominated the mortgage origination industry with as high as a 70 percent market share before the economic crash.

“This appears to be a clear indication consumers are returning to the personalized service and competitive pricing offered by mortgage brokers,” said Marc Savitt, president of the National Association of Independent Housing Professionals (NAIHP) and a past president of the National Association of Mortgage Brokers (NAMB). Savitt, believes mortgage brokers are recapturing market share they lost after being made scapegoats for the housing crisis.

“Being the most highly regulated segment of the origination process, brokers give consumers a high comfort level,” he said. “Mortgage Brokers and nonbank loan officers face state testing and licensing requirements that bank Loan Officers avoid.”

Additionally, the big banks have failed to provide a satisfactory level of customer service.

Mortgage brokers took a beating due to the inaccurate portrayal that they had a big hand in the housing collapse. By now, the general public has a better awareness of the root of the problem and place the blame more fairly on the Wall Street investment bankers, large banks and lenders and the government, including Fannie Mae and Freddie Mac.

What’s the Difference between a Mortgage Broker and a Direct Lender?

Mortgage Brokers are independent originators of mortgage loans and represent several bank and non-bank mortgage companies or lenders. As such, Brokers have a wider variety of products and services than an originator that represents just one bank or lender.

In most cases, the broker receives their compensation from the Lender, not the borrower in return for originating and processing the loan.

In other words, the broker typically does all of the work and submits the loan to the bank or lender for underwriting once the file is complete.

The bank/lender approves the file and funds the loan.

Advantages of a Broker

Better rates/terms: because they represent various lenders and receive wholesale pricing, they can almost always offer better rates and terms than an originator working for a single lender.

More choices/options: by representing many lenders, the broker typically has more resources than any single lender

Personalized service: Mortgage brokers handle the processing of each loan locally and retain control of the file whereas large lenders will usually centralize their processing at distant locations.

More Experience: generally, mortgage brokers have more experience than originators that work for a single bank or lender.

Licensing, education: Brokers are required to pass State and Federal exams plus criminal background and credit checks. Originators working for federally chartered banks do not.

With record-breaking volume being experienced by all lenders, processing times and quality of service can vary greatly from one lender to another. We also see wider variation in interest rates and costs during these exceedingly busy times, too.

Dealing with an experienced, reputable mortgage broker can help relieve a lot of the frustration experienced by borrowers whose loan may be lost in the maze of the big lenders with centralized and distant loan processing. It pays to shop around and not just assume that your bank is going to offer the best deal.