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Mortgage Broker Isn't A Generic Term
Sometimes a term gets stuck in the mind of the public and that terms starts to be used in relationship to other facets of that product or service. For example, many people refer to a tissue as a Kleenex or as a copy machine as a Xerox...."Would you go xerox this for me?" I've noticed this happening with the term "mortgage broker". Unfortunately, a lot of this use of the term has a negative connotation with it. "Mortgage brokers have caused the current credit crises" for example. Or, "I called my mortgage broker and he locked my loan". Well, while a certain amount of the blame for the current credit crises can be laid at the feet of mortgage brokers, the fact of the matter is that we are only one of the cogs in the mortgage lending machine. A mortgage broker is a company that originates mortgages for sale on the secondary mortgage market who then sells this mortgage to any one of a number of different wholesale mortgage lenders. While over 50% of all mortgages are originated by mortgage brokerages, we aren't the only ones in the business. Banks originate mortgages, as do credit unions, savings and loans and mortgage banking companies themselves. For the most part these other mortgage originators originate for their own servicing portfolios, but some on occasion will broker a mortgage off to a wholesale mortgage lender. Almost all long term mortgage financing is in turn sold to one of three government sponsored entities; Fannie Mae, Freddie Mac or Ginny Mae. Each type of institution has pros and cons. Banks, Savings and Loans, Credit Unions and Mortgage Banking companies tend to be bigger institutions whereas mortgage brokers tend to be smaller companies. A mortgage broker's biggest advantage is that, since they are selling the mortgage off to any number of mortgage wholesalers, they are usually more flexible. Whereas a lender that is originating for it's own servicing portfolio might be a bit more restrictive. For example, if I originate a mortgage and lender "A" says no, I can repackage it and submit it to lender "B". Some banks and mortgage banking companies have this ability, but it's basically built into the structure of a mortgage brokerage. Anyway, this article isn't meant to be about which lender is better...they all have their roles to play, as well as their particular competitive advantages. What I really wanted to point out is that it's not uncommon to hear a reporter or a politician refer to a mortgage lender as a mortgage broker. I just wanted to make sure that you knew that this isn't always the case. R.B. "Bob" Mitchell
ValueList Real Estate Services, Inc.
St. Louis, Missouri
314-231-5478
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Contributor's Note
ValueList is St. Louis' largest full-service/discount real estate and mortgage company. We offer a wide range of mortgage products from first time home buyer programs to VA financing.
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