How A Good Mortgage Broker Helps You With Your Loan
- By Tarun Jaswani
- Published 09/22/2008
- Mortgage
- Unrated
Tarun Jaswani
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A broker acts as an intermediary who sources loans on behalf of individuals or businesses.
Traditionally, banks and other lending institutions have distributed their own products. However as markets for mortgages have become more competitive, the role of the broker has become more popular. Today in most developed markets brokers are the largest distributors of mortgage products for lenders.
Banks' activities can be divided into retail banking, dealing directly with individuals and small businesses; business banking, providing services to mid-market business; corporate banking, directed at large business entities; private banking, providing wealth management services to High Net Worth Individuals and families; and investment banking, relating to activities on the financial markets. Most banks are profit-making, private enterprises. However, some are owned by government, or are non-profits. Central banks are normally government owned banks, often charged with quasi-regulatory responsibilities, e.g. supervising commercial banks, or controlling the cash interest rate. They generally provide liquidity to the banking system and act as Lender of last resort in event of a crisis.
The nature and scope of a broker's activities varies with jurisdiction. For example in the UK anyone offering brokerage is offering a regulated financial activity; the broker is responsible for ensuring the advice is appropriate for the borrowers' circumstances and is held financially liable if the advice is later shown to be defective. In other jurisdictions the transaction undertaken by the broker may be limited to pointing the borrower in the direction of an appropriate lender and no advice given.
Therefore the work undertaken by the broker will depend on the depth of their service and liabilities. Typically the following tasks are undertaken:
Marketing to attract clients
Assessment of the borrowers circumstances (Mortgage fact find forms interview). This may include assessment of credit history (normally obtained via a credit report) and affordability (verified by income documentation).
Assessing the market to find a mortgage product that fits the clients needs. (Mortgage presentation/recommendations)
Applying for a lenders agreement in principle
Gathering all needed documents (paystubs/payslips, bank statements, etc.)
Completing a lender application form.
Explaining the legal disclosures.
Submitting all material to the lender.
A broker works as a conduit between the buyer and the lender, the loan officer typically works directly for the lender. Most states require the broker to be licensed. States regulate lending practice and licensing, but the rules vary. Most have a license for those who wish to be a "Broker Associate", a "Brokerage Business", and a "Direct Lender".
A broker is normally registered with the state, and personally liable (punishable by revocation or prison) for fraud for the life of a loan. A loan officer works under the umbrella license of their current institution. Both positions have legal, moral, and professional responsibilities as well as liabilities to prevent fraud and fully disclose loan terms to both consumer and lender.
Typically, a broker will make more money per loan than a loan officer, but a loan officer can utilize the referral network available from the lending institution to sell more loans. There are mortgage brokers and loan officers at all levels of experience.
Traditionally, banks and other lending institutions have distributed their own products. However as markets for mortgages have become more competitive, the role of the broker has become more popular. Today in most developed markets brokers are the largest distributors of mortgage products for lenders.
Banks' activities can be divided into retail banking, dealing directly with individuals and small businesses; business banking, providing services to mid-market business; corporate banking, directed at large business entities; private banking, providing wealth management services to High Net Worth Individuals and families; and investment banking, relating to activities on the financial markets. Most banks are profit-making, private enterprises. However, some are owned by government, or are non-profits. Central banks are normally government owned banks, often charged with quasi-regulatory responsibilities, e.g. supervising commercial banks, or controlling the cash interest rate. They generally provide liquidity to the banking system and act as Lender of last resort in event of a crisis.
The nature and scope of a broker's activities varies with jurisdiction. For example in the UK anyone offering brokerage is offering a regulated financial activity; the broker is responsible for ensuring the advice is appropriate for the borrowers' circumstances and is held financially liable if the advice is later shown to be defective. In other jurisdictions the transaction undertaken by the broker may be limited to pointing the borrower in the direction of an appropriate lender and no advice given.
Therefore the work undertaken by the broker will depend on the depth of their service and liabilities. Typically the following tasks are undertaken:
Marketing to attract clients
Assessment of the borrowers circumstances (Mortgage fact find forms interview). This may include assessment of credit history (normally obtained via a credit report) and affordability (verified by income documentation).
Assessing the market to find a mortgage product that fits the clients needs. (Mortgage presentation/recommendations)
Applying for a lenders agreement in principle
Gathering all needed documents (paystubs/payslips, bank statements, etc.)
Completing a lender application form.
Explaining the legal disclosures.
Submitting all material to the lender.
A broker works as a conduit between the buyer and the lender, the loan officer typically works directly for the lender. Most states require the broker to be licensed. States regulate lending practice and licensing, but the rules vary. Most have a license for those who wish to be a "Broker Associate", a "Brokerage Business", and a "Direct Lender".
A broker is normally registered with the state, and personally liable (punishable by revocation or prison) for fraud for the life of a loan. A loan officer works under the umbrella license of their current institution. Both positions have legal, moral, and professional responsibilities as well as liabilities to prevent fraud and fully disclose loan terms to both consumer and lender.
Typically, a broker will make more money per loan than a loan officer, but a loan officer can utilize the referral network available from the lending institution to sell more loans. There are mortgage brokers and loan officers at all levels of experience.
