Julie Johnson

Better Homes & Gardens Real Estate | David Winans & Associates

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No Mortgage Brokers? Bad for consumers.

February 13th, 2009 · 2 Comments · Finance

Mortgage Brokers are responsible for finding loan options for home buyers. They work with many banks, increasing competition, to get you the best possible interest rate. But the banks want to change this. They want to cut out what they see as a “middle man” and have their bank loan officers work with buyers directly. While this may increase bank profits, it reduces competition which will ultimately be bad for buyers.

JP Morgan Chase has already announced it’s plan to no longer use mortgage brokers, citing it’s now more than 5,000 branch offices, including 2,200 which were acquired thru their recent acquisition of Washington Mutual. According to Chase, the two main reasons they decided to not use brokers is because they believe the best way for loans to originate is through one of their loan officers and that loans originated by brokers failed at a higher rate than other loans.

Mortgage brokers disagree. Marc Savitt, president of the National Association of Mortgage Brokers, says “Mortgage brokers don’t develop their own products, their own guidelines and parameters. They take applications; Chase makes all the decisions.” He also says that if the loans did perform poorly, it was due to pressure from the banks. During the boom years, subprime loans were very profitable and banks wanted customers, even poor-quality customers.

So far, the other two big banks, Bank of America and Wells Fargo, have not announced plans to cut out brokers. According to Savitt, “They [Bank of America and Wells Fargo] said they were committed to the broker channel and would expand it,” he said. If this stands, the market place should remain fairly competitive.

Tags: Banks·Lenders·loans·Mortgage·Mortgage Brokers

2 Comments so far ↓

  • Baseball Mike

    Mortgage Brokers provided a completely worthless service at best, and were actually harmful at worst.

    People just need to know how to find the information themselves, and then do the work.

    Mortgage brokers made no guarantees that they looked out for your best interest — and they were getting paid, which means that in reality — you were likely paying more than you should have.

  • Etam

    Baseball Mike what a crap R U talking about? Can you go to 20 banks and check their rates? Are these 20 LOs gonna be on your side? how about 20 credit checks? R they gonna help your SCORE? People need to know how to find the information themselves? WHO ? YOU ? and couple others? If you so smart if you have 780 FICO you can go to 1st bank that you pass by and u gonna get best deal, but more people have lower FICOs and they R not able to find good deal by themselfs, anyway M Brokers know how to structurize 1003s they know how to got you a loan, LOs from Banks DONT CARE AS MUCH AS LOs from MOBRo… what a crap u talk

    ETAM

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