The term “mortgage broker” has become bastardized in recent years by the media and our elected officials in Congress. The term is often wrongly used to describe a mortgage originator who’s gone bad or done something wrong. Mortgage brokers are blamed for what’s gone foul in the mortgage industry when the room was packed with mortgage originators who work for banks, correspondents and credit unions…it’s just so much easier to blame the dog.
Yesterday, when Jillayne wrote a post about Shawn Portmann, the Seattle PI originally has the title to their article incorrectly calling him a “Mortgage Broker”; after the Washington Association of Mortgage Professionals contacted the author, he corrected the title to read: “Feds to mortgage banker: We want your giant bag of money”. I considered this a small victory for WAMP and applaud them for getting the Seattle PI to correct their title and for defending the mortgage industry.
I wasn’t so lucky last spring when I tried to get the Seattle Times to correct calling a mortgage orignator who worked for Chase Bank a “mortgage broker“…you might remember the story involving stated income loans for hot dog vendors and limo drivers from Russia who were trying to sue Chase for hundreds of thousands of dollars over their lost earnest money. She refused to correct her article. How an employee of Chase is a “mortgage broker” beats the heck out of me.
It’s very convenient for big banks to vilify “mortgage brokers” because somehow they believe it makes their mortgage originators appear to be of a higher quality. And….once the small mortgage broker industry has reduced to almost nothing, consumers will all have to go to one of three banks or a handful of remaining correspondent lenders or credit unions for their mortgage needs.
The big bank$ have convinced Congress that it is the “mortgage broker” who has smelled up the industry. Somehow they forgot to mention that:
- mortgage brokers only sell bank products and programs. Wholesale bank reps call on mortgage brokers and correspondent lenders begging for our business. Back in the subprime days, they’d be lined up out my door pushing Countrywide, Washington Mutual or World Savings/Wachovia option ARMs stated income or 100% financing. These programs were created by the banks/lenders not brokers. The broker was the street dealer (sales) and the bank was the drug-lord/meth-lab (supply).
- mortgage banks/wholesale lenders underwrite the loans that brokers originate for the bank. Brokers do not make underwriting decisions–mortgage banks do and correspondent lenders do can (per bank guidelines). If a wholesale lender/bank did not want to make a loan sent to them by a mortgage broker–they could decline it!
This morning, I’m reading the White House Blog’s “Top 10 Things You May Not Know About the Wall Street Reform and Consumer Protection Act” and number 2 is:
“Mortgage brokers will be prohibited from making higher commissions by selling mortgages they know consumers can’t afford.”
First of all, I agree that NO mortgage originator, regardless of the type of institution they work for, should earn a higher commission for selling inappropriate mortgages–in fact, they should not originate that loan <period>. This point is so poorly written — is it saying that a mortgage banker CAN make a higher commission originating bad loans? Our own White House has joined in on bastardizing the “mortgage broker”!
My plea is that Congress and the media use the term “mortgage originator” when in doubt of what type of institution the MLO is employed by or if they’re making a general statement about mortgage originators. The definition of “mortgage broker” is not an unsavory mortgage originator. This is reckless to an industry that is fighting to stay alive.