You thought Real Estate agents were crooks? There’s a reason why mortgage brokers are getting raided by the FBI instead…
So, I saw a headline recently reading “confessions of a mortgage broker” and how they do business. Reproducing the story from Yahoo here was difficult to find. So, instead I searched on YouTube.com to see if there were any good clips. The #1 clip for the search on the phrase “mortgage broker” was a news story about a broker I believe in California getting raided for doing shady business. He and his company were falsifying documents to secure loans for people.
Well, I always had a hard time “advising clients” on who they should use. To be frank in retrospect, while I knew more than my clients, I wish I had even more time to understand all the principles and methods in which the brokers or loan officers operated to make money. Another video I’ll place here explains one method in which they make money. Basically, after seeing it, you’ll see the simple fact is that we all just simply work off margins. The higher the margin, the better for the real estate agent or the mortage broker. The question for the consumer is how much are they paying and can they get a better deal?
Watch this first:
**Note: this guy is also trying to “sell” you by telling you some of the secrets, but possibly not telling you everything…not sure though. Also, I was just a little suspicous that he could take care of kids AND clients to make a living. I’m sorry, but he’s sacrificing one or both…doing a good job in either business or school requires a lot of hours.
Even up through the last day of my business, I really had a hard time advising on these guys. Many wanted me to recommend them to my clients, but even though I mentioned a few of them to clients, I said it would be best to do your own homework regardless. It’s just too unclear how they all do business. Anyway, I give you questions earlier to interview your real estate agent…well, I would recommend asking these questions to your mortgage broker & if they do answer them well, I guess you may be in business. However, do they have the time to take care of you? Good question…I think that’s a critical test you need to apply on them as well. Also, make sure they provide several recommendations.
Questions for a mortgage broker to earn your business (get the answers ALL IN WRITING if possible):
1) What are the Discount Points and Origination Fees?
2) Will the Lender Guarantee the GFE (good faith estimate)? What will they do if it’s incorrect — get concrete answers (again, in writing if possible)?
3) Do You Offer Loan Rate Locks?
4) Is There a Prepayment Penalty?
5) Are You Equipped to Approve Loans In-House? Most likely most of them are outsourced…meaning they have less control over the affairs to help you.
6) How Much Time Do You Need to Fund?
7) How much are you making off this deal?
How many deals will you be doing this month?
9) How much time will you be dedicating to me?
10) Will you be available when I need you in a dire situation?
11) Are you taking a vacation during any period of time during my loan? If yes, how can I reach you?
12) What kind of relationship to you have with my real estate agent? How well do you know each other? This will be a good test when your agent tells you “they know each other well” to see if it’s true. Ask questions about each other.
13) How long have you been in the business?
14) How accessible is the lender that will be funding the loan (eg. can I visit a branch or talk to someone if I need to discuss my loan, or can I access my loan account over the Internet)?
15) How savvy are you with online resources? Honestly, if the broker hasn’t figured out the great resources online, they are probably in the dark ages in terms of what is available — and in turn, what is good for you. A more savvy online person will potentially be able to get you a better loan, to be frank. Not always, but chances are that a broker that keeps up with trends and the news is a better broker for you. Check out their understanding of things you’ve read in mainstream financial periodicals. Of course, some of the REALLY savvy brokers can be dangerous in other ways. 
Hallelujah! Take it rrom someone who worked in the mortgage industry from 1996-2007, the questions raised in this article are those that every financing consumer MUST consider. Being in the industry so long, I quickly ascertained that when people sought real estate financing, they put these blinders on. They trust people to give them the best offer and to handle their transaction, without raising an eyebrow as to why it just cost them $25,000 to push some paper around for three weeks. The people who did question it were rushed through the process and believed they were painted into a corner, believing that structure was their only option. WAKE UP PEOPLE! Don’t be afraid! This is YOUR money! It’s probably the largest investment you’ll ever make. It’s your dream, your security, your life, your memories - you are personally invested as well as financially. But that does not mean you can just bury your head in the sand. There are only a few peices of paper that list out the costs - and all you have to do is tell your broker you’re not paying that much and they will reduce their fee. You can go anywhere you want, everyone uses the same pool of lenders, and every broker is competing for your business! They make money off origination points, processing fees, SRP if it’s an FHA, and a YSP off your rate! The typical broker earns 3%-6% of your loan amount! That’s insane!!!
Everyone asked me why I didn’t become a broker. I posessed the knowledge, the savvy, the contacts, etc. I couldn’t do it because I didn’t have the stomach to take advantage of people in desperate situations, and I didn’t have the heart to rip people off that could afford it, and wouldn’t notice it. I stayed on the inside, processing and pushing paperwork instead, and occassionally making the covert phone call when a greedy broker got out of control.