Mortgage brokers function as mediators who generate mortgage loans for businesses or individuals. Normally, banks and other types of lenders perform the distribution of their products. With the increasing competition in mortgage markets, the role of mortgage brokers has become much more significant.
In the majority of mortgage markets in developed countries such as USA, UK, Canada, Australia, and Spain, mortgages are performed through mortgage brokers. The services of mortgage brokers are controlled by rules and regulations for the protection of the customers. Customers rely on legal entities to maintain protection.
Functions of mortgage brokers:
Marketing activities for drawing customers
Evaluation of the financial condition of the borrowers. This might include credit history (usually received from a credit report), and the capability of the borrower to afford (supported by documentation of income).
Evaluation of the market in order to search for a mortgage product that is suitable for the needs of the customer.
Making an application for a lenders agreement (pre-approval).
Collecting all necessary documentation (bank statements, pay stubs, etc.)
Filling out the lender application form
Discussing the legal clauses
Submission of all documentation to the lender.
Mortgage brokers function as specialized intermediaries between mortgage borrowers and mortgage lenders. In todays highly competitive mortgage marketplaces, numerous mortgage lending institutions offer a comprehensive range of mortgage rates and other bonuses to draw customers.
Many customers find the mortgage market confusing and slightly discouraging because of their limited exposure to mortgage products. A mortgage broker can help by offering assistance related to choosing the most suitable mortgage. He also provides financial consultations regarding properties and mortgages. It is also mandatory for a mortgage broker to disclose the Yield Spread Premium (YSP).
Customers who have a poor credit rating find it difficult to get a mortgage lender. A mortgage broker can help customers search for lenders who can satisfy their needs. Mortgage brokers can do this because of their expertise on lending sources.
In the United States, the mortgage brokerage industry is controlled by five federal enforcement agencies, 10 federal laws, and more than 49 licensing or state law boards. Rules and regulations in Canada are regulated by the provencial goverment.
Banks use mortgage brokers for outsourcing the task of searching and evaluating borrowers. Mortgage brokers also help prevent liabilities related to foreclosure and fraud with the help of legal contracts.
A mortgage broker is not a loan officer. A mortgage broker functions as a channel between the mortgage borrower and the mortgage lender. A loan officer specifically functions directly for the mortgage lender. For functioning as a mortgage broker, a license needs to be obtained.
A considerable part of the mortgage broker industry is based on commissions. The prospective borrowers can compare the terms and conditions given by a large number of lenders with the help of Internet quotes or advertisements.
Customers should be aware of predatory lending by dishonest mortgage lenders and brokers. In predatory lending, the mortgage lenders and brokers try to make extra commissions by detecting ambiguities within the rules and regulations.
Last Updated on : 24th August 2013