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Monday, February 27, 2006

Mortgage Broker vs. Mortgage Banker

When I left a successful tenured career in the securities industry and went to work for a mortgage banker, I thought I could secure a loan for anyone, anytime, anywhere.  It was then that I realized that this was the role of a mortgage broker and not the mortgage banker position that I was working in.   So I made the change over to a mortgage broker position that I am in now.  Upon doing so, I realized that I was not alone in my confusion between the mortgage banker and the mortgage broker.  I learned that most people cannot differentiate between the two positions either.  Okay, so what’s the difference between a mortgage broker and mortgage banker?

In general terms, the distinctions look like this:

A mortgage broker is an independent real estate financing professional who specializes in the origination of residential and/or commercial mortgages.

A mortgage broker shops your mortgage scenario and provides analysis of your unique situation to bring the lender and borrower together.  So a mortgage broker has access to a multitude of investors, banks, insurance companies, trust companies, and private lenders all of whom compete on various levels for your loan.  By having access to multiple lenders, the mortgage broker has the ability to shop for the best rates and find the most liberal funding guidelines for your transaction.  Most lenders are very competitive but offer a certain niche product or look for a certain type of borrower to meet their specific underwriting guidelines.  The mortgage broker will save you the time of shopping for the lender that meets your unique situation and save you the embarrassment of possibly not being approved or being charged more unnecessarily because of unique guidelines specific to that lender.

The mortgage broker will represent all of these wholesale lenders and offer these lender’s products through a wholesale arrangement.  So the mortgage broker can offer wholesale rates, as opposed to retail rates posted by the mortgage banker.  The wholesale lender will then compensate the mortgage broker when the loan is approved and delivered.  By offering wholesale rates, a mortgage broker can in fact be more competitive than the retail side of the same bank.

A mortgage banker is a direct lender; it lends you its own money, although it often sells the loan to the secondary market but does retain the servicing rights. 

Many mortgage bankers are limited in what they can offer, which is essentially their own products.  The mortgage banker will be competitive in one or several products, and will encourage their sales agents to sell only these products to the consumer.  Other times banks will not even necessarily try to be competitive in rate, but will instead try to fill a niche, such as sub-prime loans or quick processing, etc.  In addition, if you present your loan application in a poor light (not fitting their niche underwriting criteria), you’ve already tainted the underwriting process and the loan may then be difficult to approve.  It is then time to look for another mortgage banker requiring another application, possibly another application fee, and another credit check.
   
A single application through a mortgage broker can be presented differently to various lenders without needing to repeat the application process.  The mortgage broker acts as a coach giving you the winning strategy to obtain the best loan for your situation.

What is the answer?

I believe that it is critical to have a professional advocate on your side when you are making the biggest purchase of your life.  In order to maximize the power of each dollar and save you the time and frustration of finding the right loan, using a mortgage broker makes sense.   I am certainly on the side of the borrower and I am compensated by building a business around referrals and repeat satisfied clients.  I pride myself on treating people the way I want to be treated.  As your mortgage broker, your future transactions will be treated with fairness, integrity, and my in-house processing team will make sure your funds are delivered on time as committed.

Feel free to give me a call anytime.

Greg Glover of Spectrum Financial Group in Scottsdale, Arizona  Contributed By: Greg Glover
Loan Officer
Spectrum Financial Group
7047 E. Greenway Pkwy., Suite 400
Scottsdale, AZ  85254
Phone: (480) 603-1682
Email me

Posted by Greg Glover on February 27, 2006 | Permalink

Comments

So why would anybody use a mortgage banker instead of a broker? Lack of knowledge? Wouldn't anybody in their right mind want their loan application submitted to as many lenders as possible so they have choices? It's like that mortgage commercial that says when banks compete, you win!

Posted by: George Macdonald | Mar 3, 2006 9:27:01 AM

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