A mortgage broker is a firm or sole proprietorship that performs a role as an intermediary between banks and businesses or individuals who are looking for mortgage loans. Even though banks have always vended their own mortgage products, mortgage brokers have gradually taken a larger and larger share of the loan originating market as they seek out direct lenders and banks that have the specific products that a customer wants or needs.
Nowadays, sixty-eight percent of all loans begin with mortgage brokers in the United States, making them by far and away the biggest vendors of mortgage products for banks and lenders. The remaining thirty-two percent of loans come from banks own direct marketing efforts and retail branch efforts. Mortgage broker fees are separate from the bank mortgage fees. They are based on the loans’ amounts themselves and range from commonly one to three percent of the total loan amount.
Mortgage brokers are mostly regulated in order to make sure that they comply with finance laws and banking rules in the consumer’s jurisdiction. This level of regulation does vary per state. Forty-nine of the fifty states have their own laws or boards that regulate mortgage lending within their state’s borders. The industry is similarly governed by ten different federal laws that are applied by five federal agencies for enforcement.
Banks find mortgage brokers to be an ideal means of bringing in borrowers who will qualify for a loan. In this way, a mortgage broker acts as a screening agent for a bank. Banks are furthermore able to shift forward a portion of the fraud and foreclosure risks to the loan originators using their contractual legal arrangements with them. In the originating of a loan, a mortgage broker will do the footwork of collecting and processing all of the necessary paper work associated with real estate mortgages.
Mortgage brokers should not be confused with loan officers of a bank. Mortgage brokers are typically state registered and also licensed in order to work as a mortgage broker. This makes them liable personally for any fraud that they commit during the entire life span of the loans in question. Being a mortgage broker comes with professional, legal, and ethical responsibilities that include proper disclosure of mortgage terms to consumers.
Mortgage brokers come with all kinds of experience, as do loan officers, who are employees of banks. While loan officers commonly close more loans than mortgage brokers actually do because of their extensive network of referrals within the bank for which they work, the majority of mortgage brokers make more money than loan officers make. Mortgage brokers generate the lion’s share of all loan originations within the country as well.
Mortgage brokers are all represented by the NAMB, which is the acronym for their group the National Association of Mortgage Brokers. The NAMB’s mission is to represent the industry of mortgage brokers throughout the U.S. It also offers education, resources to members, and a certification program as well.