A Mortgage Broker is defined by Wikipedia as â€œa person or company that acts as an intermediary who sells mortgage loans on behalf of individuals or businessesâ€?.
Years ago, banks and other lenders had sold mortgages on their own thus controlling the now competitive market. Today, the mortgage business has evolved into a very competitive market and the role of a Broker has gained popularity. The role of a Broker has also surpassed the role of banks and other lenders to become the largest sellers of mortgages. These roles are regulated by each individual state and the Broker must be licensed to sell in their state.
There are numerous tasks of the Mortgage Broker and the proper management of these responsibilities typically put themselves and their companyâ€™s reputation on the line both financially and ethically. They handle all of the marketing and share a large part in the advertising that will attract a client to their firm. They also handle some of the more tedious work like background and credit history of a perspective client. This is a function that saves the actual mortgage company valuable time and effort. This would include income verifications of the client to make sure they even qualify for the programs available. By handling these verifications & history checks, the Broker can assess exactly what program will fit the needs of his client. The Broker also assists the client in the pre-approval process which will allow their client to shop for a home at their leisure with a more competitive edge.
When it comes time for the mortgage to be signed, the Broker does the legwork of gathering paystubs, insurance documentation, and bank statements that will prove to the mortgage company they can handle repayment of the loan. They will also handle the lender application forms which insure that they are completed correctly and in their entirety. The most beneficial function that the Broker handles at the signing of the mortgage is the explaining of the legal documents the client is signing and making sure they are signed and completed correctly.
According to a study conducted in 2004 by the Wholesale Access Mortgage Research & Consulting, Inc., there are approximately 53,000 Broker companies which employ approximately 418,000 employees which account for 68% of the residential loans in the United States. It is estimated that number increased to roughly 80% in the year 2007. At this point with the economy in a struggle, the smaller Brokers are struggling to survive.
Today, Mortgage Brokers that have survived are more competitive due mainly to their access to pricing discounts and capital markets. The Broker typically has much lower overhead costs compared to the large banks and lending institutions. They also have the advantage of lowering rates instantly to compete for their clients. This is allowing them to control 60% to 70% of the market. So, the next time you are looking for a mortgage check out your local Mortgage Broker and compare the rates and services — you may be surprised.