Do you remember life before mortgage brokers? If you needed a loan, you went to “your” bank and sat down with the loan officer. Often, you had to have an account with that bank or they wouldn’t even talk to you.
After you explained your needs the bank would decide whether or not you could buy that house, or car, or get the money you needed for some other purpose. If they turned you down you could go talk to some other bank and hope for a different answer. If they said yes, then you took the loan program they offered or didn’t get a loan.
Then came mortgage brokers. They had access to loans from a wide variety of banks, and those banks had different programs for different kinds of borrowers. Some, such as the sub-prime loans, were ill-advised, but the banks offered them and your local mortgage broker could help you get in.
Now the trend is reversing, and many mortgage brokers believe they will soon be out of business.
JPMorgan Chase and Citi recently announced they will no longer accept loan applications submitted through brokers. If you want to do business with them, you have to go sit down with one of the bank’s loan officers. If there are none near you, you can make application over the phone or on line.
One reason banks say they are making this move is to “better serve the consumer” by putting them in the right loans. They’re trying to blame brokers for the loan programs the banks themselves promoted and the “bad loans” that their underwriters approved.
Some banks, such as Wells Fargo, still believe in working with brokers, but they may be a dying breed.
This trend is, of course, a loss for consumers. Brokers were able to “shop their loan” among a variety of banks and find the program best suited to the individual consumer. If necessary, they could switch the loan from one bank to another, saving the consumer from re-submitting loan applications at a variety of banks.
They are also more accessible to consumers. Banks close on time and are rarely open on week-ends. Mortgage brokers make themselves available to their customers during week-end and evening hours.
Mortgage brokers are also more responsive to providing the hand-holding that some consumers need. Activities such as alleviating fears, helping find lost documents, and explaining procedures are all part of a days work for a mortgage broker. It isn’t likely that bank loan officers will offer the same kind of personal service.
Along with a loss in service, some in the industry believe that the elimination of mortgage brokers is a first step in the direction of higher loan fees due to lack of competition. Most working consumers simply don’t have the time to visit every bank – either in person or on line – to make application, compare rates and fees, and make a decision.
Author:Mike Clover
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