How They Work: Mortgages Brokers

Mortgages brokers negotiate mortgage loans for businesses and individuals. In the past, banks and lending institutes would sell their own products. Today, mortgage markets are competitive and mortgage brokers are on the rise.

These professionals are the highest sellers for lenders within developed mortgage markets. These professionals are determined to seek out lenders or banks that have what their client desires. Most of the transactions handled in these markets are supervised to discourage behavior that is not in compliance with financing and banking laws. The degree of regulation is, however, relative to the jurisdiction.

There are different types of banking activities. Retail involves working closely with small businesses and individuals. Business banking is the offering of services to middle-market businesses. Corporate banking is targeted for large businesses. Management services are provided to individuals and families with high net worth in private banking. Investment banking relates to activities in financial markets. Most banks are profit making and private businesses. Some may be government owned and non-profit.

The tasks of these professionals will range depending on jurisdiction, depth of service and liabilities. Generally, they conduct marketing to attract clients. They are also responsible for assessing the circumstances of a borrower and searching the market for a product that fits the needs of their client. Usually they handle the pre-approval process as well.

They may also be responsible for: explaining legal disclosures, completing lender applications, gathering pay stubs, bank statements and other important documents, and submitting material to lenders. Primarily, their goal is to save their clients money. This may be done by finding product deals in the market or offering sound advice to their clients.

These professionals are different from loan officers. Brokers work with borrowers and lenders, acting as a channel between the two, while officers work exclusively or lenders. Most jurisdictions require brokers to be licensed and registered within the state they operate in, but officers work under the same license of their institution. Typically brokers make more money than officers. Still, an officer has the advantage of getting more clients and selling more loans. This is because they have access to a referral network from their institution.

The mortgage finance industry is primarily commission based. The industry is very competitive now that brokers have access to discounted prices, wholesale capital markets and inexpensive overhead costs. In addition to those perks, they are able to lower rates on the spot to compete for clients. Professionals, however, must comply with regulations put in place by these laws in order to charge a borrower.

Large companies with lending licenses even sell or broker mortgage loan transactions that they originate and close. There are less bankers servicing and keeping their loans than in the past. Mortgage lending is dependent on the secondary market and mortgage application. Selling these loans in the secondary or wholesale market is common. This is because it provides permanent capital for borrowers.

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