Mortgage

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• Marketing to attract clients
• Assessment of the borrowers circumstances (Mortgage fact find forms interview). This may include assessment of credit history (normally obtained via a credit report) and affordability (verified by income documentation).
• Assessing the market to find a mortgage product that fits the clients needs. (Mortgage presentation/recommendations)
• Applying for a lenders agreement in principle (pre-approval)
• Gathering all needed documents (paystubs/payslips, bank statements, etc.),
• Completing a lender application form.
• Explaining the legal disclosures.
• Submitting all material to the lender.
• Up holding their duty by saving their clients as much money as possible by offering best advice for the clients circumstances.

[edit] Mortgage brokerage in the USA

According to a 2004 study by Wholesale Access Mortgage Research & Consulting, Inc., there are approximately 53,000 mortgage brokerage companies that employ an estimated 418,700 employees and originate 68% of all residential loans in the U.S.. The remaining 32% is retail done through the lender's retail channel, which means the lender does not go through a broker.

The mortgage broker industry is regulated by 10 federal laws, five federal enforcement agencies and 49 state laws or licensing boards.^{[citation needed]}

The banks have used brokers to outsource the job of finding and qualifying borrowers, and also to outsource some of the liabilities for fraud and foreclosure onto the originators through legal agreements.^{[citation needed]}

During the process of loan origination, the broker gathers and processes paperwork associated with mortgaging real estate.

[edit] Difference between a mortgage broker and a loan officer

A mortgage broker works as a conduit between the buyer and the lender, the loan officer typically works directly for the lender. Most states require the mortgage broker to be licensed. States regulate lending practice and licensing, but the rules vary. Most have a license for those who wish to be a "Broker Associate", a "Brokerage Business", and a "Direct Lender".

A mortgage broker is normally registered with the state, and personally liable (punishable by revocation or prison) for fraud for the life of a loan. A loan officer works under the umbrella license of their current institution, typically a bank or direct lender. Both positions have legal, moral, and professional responsibilities as well as liabilities to prevent fraud and fully disclose loan terms to both consumer and lender. Additionally, agents of mortgage brokers may refer to themselves as "loan officers".

Mortgage brokers must also be licensed through the Nationwide Mortgage Licensing System and Registry (NMLS). The purpose of the Nationwide Mortgage Licensing System is to improve and enhance mortgage industry supervision, create better communication from state to state, and to create consistency in licensing requirements and automate the licensing process to the greatest degree possible. Loan officers that work for a direct lender are required to be registered with the NMLS, but not licensed.

Typically, a mortgage broker will make more money per loan than a loan officer, but a loan officer can utilize the referral network available from the lending institution to sell more loans. There are mortgage brokers and loan officers at all levels of experience.

[edit] Industry competitiveness

A large segment of the mortgage finance industry is commission based. Potential clients can compare a lender's loan terms to those of others through advertisements or internet quotes.

In the 1970s, mortgage brokers did not have access to wholesale markets, unlike traditional bankers. Today, mortgage brokers are more competitive with their access to wholesale capital markets and pricing discounts. A mortgage broker has lower overhead costs compared to large and expensive banking operations because of their small structure.^{[citation needed]} They can lower rates instantly to compete for clients. Larger companies are less competitive since they provide their sales representatives their fixed rate sheets. Loan officers often cannot reduce their companies' profit margin and may be higher or lower than the marketplace, depending on the decision of managers. Thus, mortgage brokers have gained between 60 to 70% of the marketplace.^{[citation needed]}

Mortgage brokers can obtain loan approvals from the largest secondary wholesale market lenders in the country. For example, Fannie Mae may issue a loan approval to a client through its mortgage broker, which can then be assigned to any of a number of mortgage bankers on the approved list. The broker will often compare rates for that day. The broker will then assign the loan to a designated licensed lender based on their pricing and closing speed. The lender may close the loan and service the loan. They may either fund it permanently or temporarily with a warehouse line of credit prior to selling it into a larger lending pool.

The difference between the "Broker" and "Banker" is the banker's ability to use a short term credit line (known as a warehouse line) to fund the loan until they can sell the loan to the secondary market. Then they repay their warehouse lender, and obtain a profit on the sale of the loan. The borrower will often get a letter notifying them their lender has sold or transferred the loan. Bankers who sell most of their loans and do not actually service them are in some jurisdictions required to notify the client in writing. For example New York State regulations require a non servicing "banker" to disclose the exact percentage of loans actually funded and serviced as opposed to sold/brokered.

Brokers must also disclose Yield spread premium while Bankers do not. This has created an ambiguous and difficult identification of the true cost to obtain a mortgage. The government created a new Good Faith Estimate (2010 version) to allow consumers to compare apples to apple in all fees related to a mortgage whether you are shopping a mortgage broker or a direct lender. The government's reason for this was some mortgage brokers were utilizing bait and switch tactics to quote one rate and fees only to change before the loan documents were created. Although ambiguous for the mortgage brokers to disclose this, they decide what fees to charge upfront whereas the direct lender won't know what they make overall until the loan is sold.

Also See: Predatory lending & Mortgage fraud