According to industry sources and statistics mortgage brokers participate in more than 68% of home loans originations. The remaining 32% is retail done through the lenders retail channel, which means the lender does not go through a broker. This clearly shows that the market and consumer population (masses), still prefer having the expert mediator speaking and brokering on their behalf and for their best interest.
Lending institutions like banks, use these professionals and industry insiders as channels and means to do the job right and scout, bring, screen clients, deals and prospects to the table that pose little to no, low risk for loss of investment, etc.
In true essence the mortgage brokering centers around finding and qualifying borrowers, dealing more effectively with the burden of fraud liabilities, even foreclosures, entering into legal agreements with the brokers to enable processing of loan origination, gathering and processing documentation and paperwork, following protocol, doing due diligence to transact all things mortgaging real estate related.
Many have described this profession and pursuit, role as forming a conduit between the buyer and the lender, a licensed professional, not affiliated or employed by the lending institution per se. Lending practice and licensing, rules, guidelines and restrictions will vary, but some of the descriptors used to describe these types of activities are: direct lending, broker associates, or brokering business for residential (and/or commercial) realty.
These registration and liability type clauses (most brokers will have insurance to protect them), are in place to protect the consumer and industry from fraud, to ensure that there are legal, moral, and professional consequences that allows and encourages for full disclosure of all loan terms for example. Here are some interesting facts and statistics with regards to the mortgage brokering industry, players and its future:
– 60-70% of the marketplace is currently ‘capitalized’ on by mortgage brokering, outside of the typical banks and lending institutions due to some of these dynamics in the marketplace and the nature of the profession.
– Advertisements or internet quotes will give you a good handle on what the comparative rates and commissions of different brokers are.
– Insight, input and involvement in/with wholesale capital markets and pricing discounts give wider choice
– Lowering rates to get clients on the spot is possible, where most banks and loan officers working for them are dealing/bound by fixed rates (not able to or mandated to reduce profit margins
– Many pursue it due to the lower overhead costs compared to large and expensive banking operations
– Today these markets can tap into full and open access to wholesale markets, which will only continue to grow and expand.