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Jack M. Guttentag The Mortgage Professor

What Makes a Good Mortgage Broker? Part II

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Very Good (106 Ratings): 3.330184/5

Posted on Wednesday, April 2, 2008, 12:00AM

Last week I brought you some tips on how to know a good mortgage broker when you see one. Here are some more points to consider when you are in the market for a broker.

Good Brokers Will Not Quote Low-Ball Prices

Accurate pricing depends on a number of borrower, property, and transaction characteristics. If these are not known or used, the price cannot be accurate. Loan originators who quote the best prices possible -- and sometimes even better than the best possible -- with the intent of roping in the customer are low-balling.

Avoid any broker who quotes a price without first quizzing you about loan size, down payment, loan purpose, type of property, use of property, state, credit score, and documentation of income and assets.

Don't tempt a broker to low-ball by requesting a price on the telephone.

Good Brokers Try to Find the Best Price Available

You can't take this for granted because it can be tedious work. Brokers get their prices from wholesalers in the form of very complicated price sheets, all of which are formatted differently, making comparisons difficult. Further, while pricing the loan, the broker must also be mindful of getting the loan approved.

There isn't any very good way to monitor this, but you can ask the broker to show you rate sheets from the lenders he checked. This is not so that you can compare prices -- that would require a lot of instruction -- but simply to verify that the information is there.

Good Brokers Are Masters of Detail

Mortgages have many details that must be attended to before a loan can close. Overlooking even one can delay the closing, which could be costly to the borrower.

Good brokers avoid this danger using the same tool that is standard for airplane pilots about to take off, and increasingly in hospital intensive care units: a checklist. This is a low-tech device that has been shown to save lives, and it can also save a mortgage.

Ask the broker to show you her checklist, but don't expect to be able to keep it.

Good Brokers Keep Their Clients Informed

Failure to keep a borrower informed is one of the most frequent criticisms of brokers that I hear from borrowers, especially on purchase transactions where borrowers are faced with a firm closing date. Brokers often fail to let borrowers know that, while there is no news to report, matters are proceeding on schedule.

Negotiate an agreement with the broker on both the type and frequency of communications.

Good Brokers Attend Closings When Needed

Having a broker attend a closing may not always be feasible because the closing is too far away, and sometimes it isn't necessary because the borrower has been through the drill before. But if the borrower is a novice, having the broker available to help explain things is a major source of comfort.

If relevant to you, ask the broker if she will attend the closing.

Good Brokers Get Documents From Lender Prior to Closing

Obtaining all documents from the lender provides the borrower with an opportunity to read them at their leisure and clarify any issues. This may be more useful to the borrower than having the broker at the closing.

Ask the broker if you will have access to the final documents at least two days prior to closing.

Good Brokers Are Experienced

Mortgage transactions are complicated; there is much to learn, and brokers learn most of it by doing it. While more states are moving toward required examinations as a condition for licensing, the rules are spotty and not to be relied on. It is still possible for a borrower to be confronted with a broker who, a week earlier, was flipping burgers.

Ask the broker to summarize his work experience over the past 10 years.

Good Brokers Communicate Effectively With Borrowers

Poor brokers frequently slip into trade jargon, because they are accustomed to it, and insensitive to the client's lack of comprehension. I never fail to be amazed at mail I receive from borrowers asking me to explain something they were told by their broker. A broker who can't communicate well combined with a borrower afraid of looking stupid is a recipe for trouble.

Don't let a broker assume you understand something when you don't. Mortgages are complicated, but they are not beyond the comprehension of the average borrower, provided they are explained properly. If you don't understand what you are being told, it is because of the poor communication skills of the broker. Try another one.

Good Brokers Are Straight With Their Clients

Here are some broker statements that indicate your broker is not being straight. If you hear any of these, head for the door:

"I have a 1.5 percent mortgage for five years."
"Don't worry about the rate increasing in two years -- I will be there to refinance you into a lower rate before that happens."
"Don't worry about my fee. It's being paid by the lender."

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Yahoo! Finance User - Monday, April 14, 2008, 6:05PM ET Report Abuse
- Overall: 3/5
I am a mortgage originator who works for a mortgage company that acts both as a directt lender and a broker. A true mortgage professional works in the best interest of his or her clients without regard to his or her professional title as a mortgage broker or mortgage banker. I pride myself on my communication, knowledge, and integrity. I am the mortgage professional whose client base is about 80% referrals from past clients and business partners. To say that a borrower should steer clear of me simply because I may be classified as a "mortgage broker" is silly. One can find poor mortgage professionals in any bank, broker shop, credit union, etc. It is the individual mortgage professional that makes the difference, not the company!! Oh, and solicitation is at least 20% of our business. So to say that a consumer should not utilize my services because I solicited them is also silly!!
Bobbie M - Sunday, April 6, 2008, 1:37PM ET Report Abuse
- Overall: 1/5
GREED! That's what dominates the landscape. HB's were getting 30% profits on homes and then some MAI appraiser (Made as Instructed) would give them a 100% deal and the stupid mortgage bankers would buy the deal @ full tilt, knowing that the property wasn't worth 80% of the loan. These people call themselves professionals. They are all corrupt and should go to jail. They are the ones responsible for global meltdown. SHAME!!
Kim P - Sunday, April 6, 2008, 8:55AM ET Report Abuse
- Overall: 1/5
Well I'm a mortgage Banker. This article is so untrue. I'm o commission also and we don't fluff anything. Our rates are comparable to yours but we don't add in all the junk fees. Sorry, I've taken alot of your customers who are the smart ones and see through your crap. I agree, mortgage brokers are just another name for car salesman.
mortgbroker34 - Saturday, April 5, 2008, 12:17AM ET Report Abuse
- Overall: 4/5
Overall, great article. I've been originating mortgage loans for 10 years. Here's my advice to anyone out there who is interested in a mortgage. Do NOT go online and fill out mortgage inquiries. You will be answering calls for 2 weeks. Brokers spend 50-100 bucks apiece sometimes for these leads, and you may be dealing with people 3 states away, and pushy brokers who are in a hurry to get their money back to say the least. Do NOT call around and ask mortgage companies what there rates are, unless you are willing to have an intelligent conversation with that broker and give up some information. It is impossible to give someone a rate, (especially now in the ever tightening credit environment we are in), without at least looking at your credit and having a really good idea on the loan structure. If I listed all the adjustments the lender imposes on it's rate sheet, (Credit score, Loan to Value, by the way customers rarely know what there homes will actually appraise for..it's much more to it than what the neighbor sold for 18 months ago,and this guessing can affect the rate on your loan, DTI (Debt to Ratio calculations), Cash-out, or Rate/Term adjustors, Loan Amount Adjustors, State Adjustors, Escrow Waivers, and Fannie Mae just passed a couple of fees down to us brokers, that if you don't have above a 720 score, you will see a difference in rate, or I will have to pass that along to you or raise the rate. Sorry, you can thank Fannie for that one. They are making it much harder to make loans to people if you haven't noticed. I could fill the rest of this page, but I think you get the point. Do NOT assume your best deal is at the bank. I assure you, banks have much more overhead than your local mortgage company, and they are not giving anything away. Grant it, If you are a good customer at a particular bank, perhaps you have decent depository accounts balances, other loans (car, HELOC), then banks can go low on closing costs, rates, etc..and be competitive to fight for your business. I guarantee you my rate sheets beat most of our local banks time after time. (Usually by .25-.375 on average. However, this is the one thing you have to remember.....We work on 100% commission. No benefits, no time clock, no employee paid life insurance or health insurance for the most part...your local banker is salaried, and will receive a paycheck whether he originates a loan or not. So be careful if you are shopping around, many a broker work for nothing by educating customers and providing loan options only to have that customer go to their bank. DO get a referral. Referrals are the name of the game, and for brokers who want to be around for the long haul, we can't afford to have a bad name, or be known as someone who costs are high.
Yahoo! Finance User - Friday, April 4, 2008, 8:02PM ET Report Abuse
- Overall: 1/5
For the record, I used to be a loan officer, but have since moved on... Some of the points/tips Jack give are great, and can be applied to any industry, but some are a little over the top. This is minor, but I can't help myself from pointing out that there is a difference between a Mortgage Broker and a Loan Originator...not all loan originators are mortgage brokers. I often wonder why folks complain about not getting full disclosure...every loan application I've ever seen (whether from broker, bank, or credit union) states very clearly the terms of the loan. In fact, in my experience, most Brokers over-disclose with pages that repeat themselves. I have almost always received lower rates from my Broker than my credit union or bank as well. I also wonder why everyone wants to know how much a loan originator marks a rate up...I never hear anyone complain about how much Starbuck's marks up a cup of coffee...or even how much a Lexus is marked of from it's costs. If you don't like the price of those things, you can shop around... By the way, I believe it is illegal for a loan originator to share a lender's rate sheets with the consumer...Countrywide doesn't want you to know that the mortgage broker down the street can give you a better rate on one of their loans than their own Countrywide loan officer can ;) ... Speaking of shopping around, be reasonable. You don't make your Starbucks barista make you a drink, only to go across the street to another coffee shop to make you a drink, then take a taste of both and then choose which one you'll buy. People don't realize that often times when they shop around, they are often making several legitimate loan originators do a lot of work that they'll never get paid for. So be careful before you waste everyone's time - you can get a really good idea of what rates are at online (www.bankrate.com). In all honesty, most loan originators are not going to gouge you...so if you feel comfortable with someone, or get a referral to someone - give them a try and work together. If a huge red flag goes up - then of course, go to someone else... Conclusively, Jack G. would help every consumer 100x more if he spent more time trying to influence lenders to set reasonable loan parameters for borrowers - rather than trying to teach them how to pick a good loan officer.

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