Back in the early 90s when I first started in real estate someone thought it would be a great idea to train real estate agents as mortgage loan brokers as well. The thought was to have a one stop office. Lets just have them find a house and get their loan from the same person.
I was brand new in real estate and the obvious conflict of interest didn’t even occur to me so I signed up. I took the training and learned a lot about how mortgage brokers work and how they make money. It was the making money part that made me decide to step back out of it.
But I did help two friends refinance their home. They got unbeatable loans because I personally and purposefully didn’t make a dime on the deals. I did not charge them any loan fees and priced their loan at par, which was the lowest interest rate quoted to me by the company. Basically, they got the wholesale rate.
I learned that mortgage brokers have a lot of control over how much money they make on each loan. They can charge fees to the borrower that are shown on the good faith estimate and on the settlement statement AND they can make money on the “back side” of the loan that is not disclosed anywhere.
It is very possible that a mortgage broker could charge no up front fees at all on the loan and still make more money that another lender who charged a 1% loan origination fee. According to Karen George in Arizona it is possible to make as much as 5% on a conventional loan. In fact even more can be charged for a sub-prime loan. Most of the local lenders don’t make anything close to this amount, but they should still tell you how much they are charging.
Why is it important to know how much your lender is making? Because YOU are paying the bill. The money that is going into the lender’s pocket is coming out of yours even if you don’t know it. I think people should be paid for the work they do, and they should be paid fairly. But I think it’s fair that we know how much we are paying for a service.
Most but not all of the local lenders I talked with were very defensive when I asked them how much they made on their loans. Apparently most of the local mortgage officers, (as opposed to mortgage brokers), don’t have much control over how much they are paid. But they still didn’t like talking about it.
There were two people that did seem open about discussing this with their clients. These were Tara Murdoch-Barnes and Kirsten Forbess of Alaska USA Mortgage, (352–8306).
If you have read this far, it means you are interested in this subject. If so, check these two websites out that were recommended by a local loan officer friend:
Some may say ‘what’s good for the goose is good for the gander”, how much are real estate licensees paid? I’ve discussed that before in commissions. But there are some things most people don’t know about how Realtors are paid and that is a subject for tomorrow’s blog post.