Mortgage Broker vs Mortgage Banker? The Tale of One Loan!

Real Estate Agent with ReMax 10

I am working with an A list Buyer who insisted on going to her Bank because it was down the street from her house and convenient.....the Bank (which I will not name) is one of the largest and my history with them closing on time and efficiently has not been good.  But I obey and go with my customer through the underwriting process etc.  My preference was a Mortgage Broker with an unflappable track record, but she thought differently, after all this is the bank she goes to all the time. (Even thou the underwriting process is taking place in an unnamed state)

Now the loan officer made a lot of promises to my client, a promise to close in 30 days, a promise to communicate, a interest rate promise (which was used to lure her in) blah, blah, blah. As Realtors we know better and many clients use their Realtorsknowledge and expertise to avoid anguish or missteps that can occur during the process of buying a house......these days (after 2008 bank collapses) the mortgage process can either be a good or bad experience.  The week before we were suppose to close, I find out that there was a big oops! It appeared that their was an oversight on the buyers tax return, showing a loss of a business by her husband (whom she was divorcing). Her husband had thoughtfully put her name as a 5% share holder and so she must share in the losses causing her debt ratio to go down.  She was denied.....meanwhile the Loan Officer is calling me with many suspicions about my client (is it fraud? is she trying to buy a second home because her present home is in foreclosure, oh my!) I was appalled at her suggestions.

Immediately I go into survival mode....we contact the Mortgage Broker I originally wanted my buyer to go with and guess what he found.......a second income that was omitted by the Mortgage Banker. Tsk, tsk, all that stress for nothing.

Many Mortgage Bankers are hired by banks with no test requirements (because they are a Bank!), work on salary, while Mortgage Brokers are licensed, paid on commissions and have lots of skin in the game.  I ask you....Mortgage Banker or Mortgage Broker?

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Cynthia Larsen
Cotati, CA
Independent Broker In Sonoma County, CA

I've had good and bad experiences with both! You have one you like because they can get the job done, and that's all that counts. Great job!

Sep 29, 2010 01:01 PM #1
Lenn Harley
Lenn Harley,, MD & VA Homes and Real Estate - Leesburg, VA
Real Estate Broker - Virginia & Maryland

Anecdotes are not representative of quality.

Sep 29, 2010 01:07 PM #2
Alia Marie Hazen

It is 6 of one 1/2 dozen of another.  I think so much of it comes down the the human doing the work for you.  I have a great banker and it has everything to do with her and how much work and care she puts into each loan.  I also have a great broker and it is becuase of the same thing.

However, i find myself going to the broker it seems he has more ease closing.

Sep 29, 2010 01:34 PM #3
Conrad Eberhard
iBERIABANK Mortgage - Fayetteville, AR
Mortgage Lender

I have worked as a retail mortgage lender and now as a correspondent lender.  Previous employer the loan processing was done off site.  Current employer the loan processing is done in house (my office).  As I have found out the local processing is very a important in todays mortgage world.  However one item above that, is the knowledge of the mortgage lender.  If you are working with a good lender that knows the guidelines they will get the job done, but it starts with that lender.  

Sep 29, 2010 03:09 PM #4
Rodney Mason
Guaranteed Rate NMLS# 2611 - Atlanta, GA
VP of Mortgage Lending - AL, FL, GA, SC, & TN

I worked for a mortgage broker for my first year in the business.  I have been on the banker side ever since.  I much prefer the control over my files that allows for. 

I really do not think that what you experienced was the result of mortgage banker vs mortgage broker though.  Of course, all I can do is make assumptions based on some info you provided.  A closing in <30 days can be a challenge in today's market.  Essentially, there is very little time built in for title/appraisal/underwriting issues to be dealt with. 

As for the income, here is what I can speculate.  The buyer probably was a W-2 employee, so the first LO only got her pay stub and W-2's and not her Federal tax returns.  I would imagine that thebuyer never disclosed to the first LO that she had any ownership in her husband's company.  Without either of those facts, the first LO could not have known that there would be a business loss to be dealt with.  As a measure of QC, all lenders now pull tax transcripts.  This is most likely when the business loss came to light.

That brings up another point as you called her an "A List Buyer".   It sounds like she was really a B or a C borrower.  Unless the loss in the company was huge, a 5% ownership stake should not have increased her debt to income ratio by that much unless she was already on the border to begin with.  A true "A" would have a much lower and would not have been impacted by the change. 

Again with the second income.  How did that just magically appear?  It sounds obvious to me that it was never disclosed to the LO by the buyer.  Had the buyer provided 2 years of W-2 and a a current pay stub, then the first LO would have known about it, rather than it being discover like a buried treasure.  Keep in mind that we are not mind readers.

I cant imagine why you would take offense about someone questioning an occupancy status.  Borrowers try to commit occupancy fraud all of the time.  The LO is not doing their job unless they address possible fraud issues.  One spouse getting foreclosed upon while another tries to buy is a really.  Its called playing the system and mortgage fraud. 

Most bank loan officers also work on commission just like Mortgage Brokers and non-bank Mortgage Bankers.  I get copies of all borrowers tax returns upfront.  That eliminates any un-reimbursed business expense or side business surprises.  Most of this just comes down to experience and knowing what to look for upfront.

Sep 29, 2010 03:26 PM #5
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Andretta Robinson

Real Estate Broker - Chicago South Suburbs
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