Mortgage brokers function as mediators generating mortgage loans for businesses or individuals.
Conventionally, banks and other types of lenders performed the distribution of their products on their own. Nevertheless, with the increasing competition in the mortgage markets, the role of the mortgage broker has become much more significant.
Currently, in the majority of mortgage markets present in developed countries like the USA, the UK, Canada, Australia, and Spain, the maximum portion of mortgage product distribution is done through mortgage brokers.
The services of maximum mortgage brokers are controlled by rules and regulations. This is done in order to ascertain a degree of protection for the customers. However, the magnitude of the rules and regulation relies on the legal power.
The functions of a
mortgage broker can be categorized into the following types:
- Marketing activities for drawing customers
- Evaluation of the financial condition of the borrowers. This might include evaluation of credit history (usually received from a credit report), as well as the capability of the borrower to afford (supported by documentation of income)
- Evaluation of the market to search for a mortgage product that is suitable for the need of the customer
- Making an application for a lenders agreement in principle (pre-approval)
- Collecting all necessary documentation (bank statements, payslips or pay stubs etc.)
- Filling out the lender application form
- Discussing the legal clauses
- Submission of all the documentation to the lender
Mortgage brokers function as specialized intermediaries between the mortgage borrowers and the mortgage lenders. In today's highly competitive mortgage marketplaces, a large number of mortgage lending institutions offer a comprehensive range of mortgage rates and other bonuses for drawing customers.
Many customers find the mortgage market confusing and slightly discouraging because of their limited exposure to mortgage products. A mortgage broker helps in this regard. A mortgage broker offers assistances related to choosing the most suitable mortgage. He also provides valuable financial consultations regarding properties and mortgage.
It is 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 this kind of customers to search for lenders who can satisfy their needs. They are able to do this because of their expertise and cognizance about a large number of lending sources.
In the United States, the mortgage brokerage industry is controlled by five federal enforcement agencies, 10 federal laws, as well as more than 49 licensing or state law boards.
The banks implement the mortgage brokers for outsourcing the task of searching and evaluating borrowers, as well as few 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 and on the other hand, a loan officer specifically functions directly for the mortgage lender. For functioning as a mortgage broker, a license has 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.
The rules and regulations controlling mortgage brokerage in Canada are ascertained by the provincial governments.
The customers should be aware about the predatory lending run by dishonest mortgage lenders and brokers. In case of predatory lending, the mortgage lenders and brokers try to make extra gain by detecting ambiguities within the rules and regulations.