Everyone knows that the mortgage crisis resulted, at least partially, from the massive number of sub-prime loans written with ARM's that reset - leaving the borrowers unable to meet the mortgage payments.
We also know that those programs were offered by the major banks - partially in response to urgings from the Federal Government to help low income people own homes.
So guess who the banks are blaming? Mortgage brokers, that's who.
The banks created the loan programs, established the terms, and offered them to the public through mortgage brokers. They even sent reps to the mortgage companies to promote their programs and help those brokers understand the great benefits they offered.
Then, the banks' own underwriters approved the applicants And now - the fault lies with the mortgage brokers?
This ill-placed blame is one reason banks such as JPMorgan Chase and Citi Bank cite for cutting off ties with mortgage brokers. Another is that they believe their own loan officers are better equipped to help borrowers evaluate their loan choices and make a good decision. Never mind that residents in some communities will have to apply over the phone or on line.
Some banks, such as Wells Fargo, still believe that the public is best served by working with mortgage brokers rather than having to visit bank after bank to make application before they can compare rates and terms. After all, brokers have the ability to shop for loans at a variety of banks - even though that variety is shrinking daily. Brokers are also able to shift a loan from one bank to another if they encounter a problem with underwriting.
In addition, talking with a local broker is more comfortable for a consumer. Mortgage brokers are more apt to take the time to answer the same questions repeatedly, help consumers understand and gather all the paperwork that a bank requests, and even explain details at the closing table.
Unlike banks that have "regular" hours, mortgage brokers are often willing to meet with borrowers after work or on the week-ends, saving them from needing to take time off work to apply for a loan.
Many in the mortgage industry feel that the elimination of mortgage brokers will allow banks to begin charging higher fees for their services. They'll still have competition, but that competition will be less accessible - making it more likely that consumers will stick with the first bank they visit, rather than spend the time to shop around.
It is a fact that a mortgage broker will find a better loan and offer more options than the big banks. This is true for all credit types regardless of your credit score. Skip dealing with the big banks and let a mortgage broker find you the best home loan.
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