What is a Mortgage Broker

A mortgage broker is a licensed professional who acts as a middle man between borrower's and lenders. Over 80% of home loans issued today are by brokers. The banks have used brokers to effectively outsource the hassles of working with borrowers (sorry guys, but that's the most important reason brokers exist), and also to outsource some of the liabilities for fraud and foreclosure onto the originators through legal agreements. As such, Mortgage Brokers have been stigmatized, and most are considered unethical, unprofessional, and at times, criminals. Frequent news reports about Mortgage Brokers sent to state and federal prisons certainly is not helping the industry's plight to be recognized as a legitimate real estate player.

During the process of loan origination, the Broker gathers and processes paperwork associated with mortgaging real estate. A loan officer acts as the conduit between buyer and lender. Most states require the mortgage broker to be licensed, others do not.

Why use a broker? Why not go straight to the bank?

Banks want people as retail mortgage clients who don't need the money! They prefer creme de la creme and leave the other 80% for the brokerage industry. Don't fret about paying a little extra to a broker, they do much of the work, and banks would either deny more credit, or charge even higher margins to compensate employees for the kind of high stress work performed by brokers for their less than perfect profile borrowers.

Difference Between Broker and Loan Officer

Mainly licensing. States regulate lending practise and licensing, so this is different all over, however, most have a license for those who wish to be a "Broker Associate", a "Brokerage Business" and a "Direct Lender".

A Broker is almost always registered with the state, and personally liable (punishable by revocation or prison) for fraud for the life of a loan. A loan officer is typically not liable for their actions, and are working under the umbrella license of the institution they are at. Typically, they have lessor experience in the field.

Also, loan officer usually connotes someone who works for a lender, and has some sort of hand in the internal processes of a lender. A broker is exclusively using the money of others to table fund their loans.

Tasks of Mortgage Broker

• Marketing to attract clients,
• Taking an application (form 1003),
• Gathering all needed documents (paystubs, bank statements, etc.),
• Walking the clients through legal disclosures,
• Pulling and studying the clients tri-merge credit report,
• Shopping for a loan product that fits the clients needs,
• Processing the loan (This may be performed by a Processor),
• Submitting all material to the lender and to an escrow company

Problems with Loan Brokers

The cut throat competition and lax regulatory environment has caused many Mortgage Broker professionals to resort to predatory lending tactics. One reason that foreclosures are at an all time high is because of the unethical dealings of Mortgage Brokers who place borrowers with unsuitable loans.

Recent trends have indicated that the states are stepping up and passing tougher Mortgage Broker laws to cut-down on preditory lending. Nonetheless, as more used car salesmen switch professions to flood the Mortgage Broker market, the plight of the Mortgage Broker industry to become a legitimate source of residential financing remains meek.