Imogen Reed writes:
Since the mortgage and housing collapse, mortgage brokers have developed a poor reputation. A lot of people singled out mortgage brokers as a major cause for the sub-prime crisis of 2008, which resulted in a whole host of regulations and laws aimed at curbing the abuse committed by some brokers.
Of course, the vast majority of brokers were completely innocent in the housing collapse and acted with complete probity, but a small minority was responsible for blatant fraud. Their actions resulted in record mortgage defaults and foreclosures that led to misery and pain for so many American families and caused a rise in the number of people out on the streets or ending up in addiction treatment centers.
Regulation
The federal government’s was swift and punitive. Independent mortgage brokers now need to pass criminal background checks as well as sit licensing exams (those working for large lenders are exempt from many of these regulations), but the biggest effect of the sub-prime scandal was to the industry’s reputation, with even President Obama referring to it as, “toxic.”
However, despite this, the number of mortgage brokers seems to be on the rise again. According to analysts, third party mortgage originations were up 11 percent at the end of the last quarter of 2011. While brokers are still bearing the brunt of blame for the economic turmoil, it seems more and more people are forgiving their misdemeanors and returning to their services to help secure a mortgage deal, but is this a good idea?
Why use a Broker
Mortgage brokers are just intermediaries. They speak to the lenders on your behalf, with an aim of getting you the best deal. Of course, they have to earn money somewhere down the line, so it begs the question, why use a broker at all, especially as their reputation is so tainted. Well, brokers do have their place and using an independent mortgage broker can have plenty of benefits for the mortgage hunter.
Independence
The first major benefit of an independent mortgage broker is in the title: independent. As they are not tied to one lender, they can give you non-biased advice. Brokers for big money lenders will only be able to sort you the best deal from their company’s various packages, but an independent broker will have access to a large number of lenders and can come back with the best product to suit your needs. This is especially useful if your situation is non-standard, such as having a property with problems that would make it difficult to secure money from a traditional lender.
Time and Effort
Finding the best deal can take time. Banks and lending companies have a various packages, all with advantages and disadvantages, so figuring out what is best for you can take a lot of time and effort. Meetings with banks can suck hours out of a busy working day, while ringing round all the various lenders could take weeks.
Once you’ve told a good independent broker you specific details and criteria, they will know who to chase and where to find the best deal to suit your needs. A good mortgage broker will work for you and will give you the best advice they can, and be able to answer your questions or make adjustments if your circumstances change during the process.
How to Avoid Trouble
Many people are still reticent about using the services of a mortgage broker, and after the housing collapse, it’s no surprise, so it is worth asking a few questions to give yourself peace of mind. Firstly, ask if they are members of the National Association of Mortgage Brokers (
Secondly, ask how they are being paid. Most brokers get a procurement fee (commission) from the lender, but some brokers do earn money from the interest on the loan. This in itself is not a red light, especially if they can get you a better deal than you could get yourself. However, it’s worth asking if they would earn less money if you chose a different loan from the same lenders, as this might mean that they are pushing certain loans or terms, which was one of the causes behind the subprime fiasco.
Independent mortgage brokers have developed a poor reputation, but thanks to regulation and swift actions by the federal government, it’s fair to say that the remaining independent mortgage brokers in the market are not crooks or out to swindle you, and their services could very well prove advantageous if you are struggling to secure a mortgage yourself.
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