Over the last decade or so there has been a huge shift in the mortgage business. In fact it became so silly that if you could fog a mirror, you could get a mortgage. From Wall Street to the banks to the mortgage brokers to the realtors and finally the consumers, everyone knew that it was just a matter of customer service to get to the closing table. Where it used to be critical that the lender was sure you would pay them back, it had shifted to an environment where if the broker could collect their fees by getting you to close, they were happy. Someone else was in charge of collecting the payments.
This made it easy to be a broker. A person could file incorporation documents and easily get a license to broker loans from the state. Then the new broker signed up with lenders that were far too happy to buy your loans from them, and set to work. They went out and found borrowers for every kind of mortgage product under the sun.
Now many of those lenders and brokers have folded. And many of the lenders have been left holding the bag with mortgages that are not performing (not making their payments) or worse. Lenders are also getting sued in wildly disproportionate numbers by the borrowers who secured their loans with them through brokers. They are successfully blaming the lenders for any and all misdeeds of the brokers in an attempt to prevent their home from going into foreclosure.
This has caused lenders to now cast a wary eye on the brokers. Several rules have made it more cumbersome to get a loan from a broker. First, google the acronyms HVCC and MDIA to get a feel for these challenges. Second, they are going through broker loans with a fine tooth comb in the underwriting process requiring more time and more information from the borrower. Finally, they are paying the brokers less for the loans to compensate for the additional risk they perceive in this channel. However, brokers don’t want to make less money so this means higher rates and fees for you to use a broker.
The combination says that you can no longer afford to get your loan from a true mortgage broker. You must get it from someone lending their own money. If you are interested in getting a mortgage today, understand that it is a more difficult process but that to ensure your best deal, you need to get your loan from someone lending their own money. You still will not likely make your payments to them after the closing but your loan will close faster, with fewer hoops to jump and at a better cost for you, the borrower.
