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Matt Pollina

Banks/Lenders VS Brokers

Thursday, October 11, 2012 - Article by: Matt Pollina - Smart Mortgage Centers - Message

Have you gotten a quote from a bank or correspondent lender recently? Did you notice that there was over $1,000.00 in closing costs? Did you know that the Dodd-Frank SAFE Act actually made obtaining a loan through a broker much safer and financially viable than through a traditional bank or correspondent lender?
Passed in 2008, the SAFE Act was supposed to require that all mortgage originators take and passes a national test; take at least 20 hours of education and then states could also require that licensees take state specific education and pass state tests. The idea? To make all originators prove they are proficient with lending programs, lending laws and then to make them pass background investigations so that borrowers know they are working with only qualified individuals. But what do the banks get that mortgage bankers and mortgage brokers do not get? They are exempted from the licensing requirements and so are all of their originators! That's right, every individual who cannot pass the test simply leaves the employ of a mortgage broker and goes to work for a bank where all they have to do is "register" and they are exempt from the same provisions of the SAFE Act.

Not only do Banks not have to disclose anywhere near as much information to consumers as do mortgage brokers, but now they have the added exemption of not even holding their originators to the same standards as brokers. At least when a consumer chooses a broker, they know they will be disclosed every cent the broker will make on the transaction (lenders can hide income calling it secondary marketing transactions) and they know that the broker has gone through an extensive background investigation as well as education and testing. Not necessarily so with a bank originator.

While requiring licensing, correspondent mortgage lenders originate and fund loans in their own name and then sell them off to larger mortgage lenders. They in turn service them, or sell them on the secondary market, many times resulting in higher closing costs and higher rates. The loans can be underwritten by the correspondent mortgage lenders, but the loan programs are usually based on terms approved by the larger mortgage lender, or "sponsor". In other words, a small correspondent mortgage lender may resell national bank products under their own name but are still a middle man. The lender will fund the loan, and usually sell it on the secondary market within a month or two. The main difference is they usually have higher rates than brokers because they can legally manipulate the rate based on their premiums while brokers have set contracts and the premiums are passed along to the consumer to offset any lender or third party fees.

I am usually in the office from 8:30am until 6:30pm. 847.322.4720

Matt Pollina

Sales Manager


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