For consumers looking to get a home loan, muddling through all the crap that the media spews out about various lenders and Mortgage Loan Originators (MLO), it's not just confusing trying to decide what kind of lender and/or MLO is best for them and their needs, it's become down right scary talking to someone about getting a loan and getting pre-approved.
I recently posted a series called CHOOSING YOUR LENDER: How Do You Know Which Lender is Right for YOU! - Part 1 and for any consumers looking to get pre-approved to purchase a home, I strongly suggest that you check this series out to learn about the various types of lenders and MLO's that would be best suited for your lending needs.
For many prospective homebuyers, a mortgage broker is going to be your best option. While there may be a lot of reports about the mortgage broker dying or being run out of the business, I assure you, that is not the case. Mortgage brokers are an absolute necessity for many borrowers in today's market. The big, national, retail banks are simply not equipped and/or prepared to serve the needs of every borrower out there. It is proven every single day that mortgage brokers serve the needs of those borrowers that the banks can not.
I can attest for a fact that as an MLO for a mortgage broker, I can offer more products, preferred underwriting and lower rates to my clients through my smaller, regional wholesale lenders than through the big banks wholesale channels.
With a 40% share of the market, mortgage brokers are far from dying. Furthermore, it's actually less expensive for the big, national banks to simply buy loans originated by mortgage bankers and mortgage brokers through their wholesale channels than it is to reduce their rates in order to compete with the mortgage brokers and bankers lower rates.
All year long, I have been hearing that the end is near for the mortgage broker. On January 1st, the new GFE was going to be the beginning of the end because MLO's for mortgage brokers could no longer collect yield spread premium (YSP) but rather had to rebate it back to the borrower and they also had to now disclose their compensation.
For many MLO's for mortgage brokers, it basically had little to no effect on the way they conducted business with their clients.
What it did do was make it clearly obvious that the depository banks and mortgage bankers didn't have to play by the same rules because they didn't have to disclose their compensation. It was business as usual for the depository banks and mortgage bankers who make service release premium (SRP), which is essentially the same as YSP.
What happened to mortgage brokers? Some mortgage brokers closed up shop and some MLO's for mortgage brokers left the business and still others went to work for depository banks or mortgage banks. However, for many MLO's for mortgage brokers, they just adapted to the changes and continued to serve their clients as they always had.
Then the Nationwide Mortgage Licensing System & Registry (NMLS) came along with the Secure and Fair Enforcement for Mortgage Licensing Act (SAFE Act), and now all MLO's for mortgage brokers and mortgage bankers were required to be licensed.
Licensing requirements included 20hrs of education, passing both a national and a state test, having a criminal background check, getting fingerprinted and having their credit checked. Of course, MLO's for the depository banks were exempt from any of these licensing requirements and it was business as usual at the depository banks.
What happened to mortgage brokers? A few more mortgage brokers closed up shop and a few more MLO's for mortgage brokers left the business and still others went to work for depository banks. Once again, many MLO's for mortgage brokers just adapted to the changes; they fulfilled their licensing requirements and continued to serve their clients as they always had.
Now, the latest "supposed" demise of mortgage brokers is going to be the Financial Reform because it "supposedly" eliminates YSP all together (the verdict is still out on that). Once again, depository banks as well as mortgage banks are exempt from this reform and they will not be required to disclose their SRP and it is, once again, business as usual for the depository banks and mortgage banks.
What will happen to mortgage brokers? A few more will probably close up shop and a few more MLO's for mortgage brokers will probably leave the business and yet a few others will probably still go and work for depository banks. Once again, many MLO's for mortgage brokers will probably just adapt to the changes and continue to serve their clients as they always have.
I think it's been pretty obvious that mortgage brokers aren't going anywhere. The big, national banks and all of their government flunkies that they own just keep throwing regulation after regulation at mortgage brokers and their MLO's in an effort to drive even more of them out of the business while they still continue to recruit others over to their side.
However, for many mortgage brokers and their MLO's, they just continue to roll with the changes in their efforts to serve their clients as they always have.
Mortgage brokers aren't dying, quite the contrary, they're just getting leaner and cleaner and they continue to roll with the changes as they come out, which for mortgage brokers and their MLO's is business as usual.