What Is A Mortgage Broker?

Answer:
A mortgage broker is an intermediary who sells mortgage loans on behalf of individuals or businesses.

In the past, banks sold their own loans. However, as the mortgage market became more competitive, using mortgage brokers has become more popular. Mortgage brokers have now become the largest sellers of mortgages for banks.

Most mortgage brokers are regulated for compliance with banking and finance laws in the customer’s jurisdiction. There is only one state in the United States with no laws that govern mortgage lending.

The scope of a mortgage broker’s activities will vary depending on their jurisdiction. The work that a mortgage broker performs will depend on the services they offer and their liabilities. Usually they will perform the following tasks: marketing to get new clients, assessment of the borrower’s situation (credit history and affordability), assessing the market to find a product for the customer, pre-approval of loans, gathering all needed documents, completing the lender application form, explain all legal disclosures, and submitting the completed package to the lender.

As of 2004, there were roughly 53,000 mortgage brokerage companies which employed roughly 418,700 employees. These brokerage companies originated 68% of all residential mortgages in the United States. The remaining 32% were originated through a bank’s or lending company’s retail channel. The banks use mortgage brokers to outsource finding and qualifying borrowers for loans, as well as to outsource some of the liabilities for fraud and disclosure onto these loan originators through their legal agreements.

The mortgage broker industry is heavily regulated. Its activities are regulated by ten federal laws, five federal enforcement agencies, and 49 state laws or licensing boards.

A mortgage broker works as a conduit between the buyer and the lender, whereas the loan officer is employed directly by the lender. Most states require licensing, and issues licenses for “Broker Associate,” “Brokerage Business,” and “Direct Lender.” A mortgage broker is registered with their state, and they are personally liable for fraud for the life of the loan. A mortgage broker will typically earn more per loan than a bank loan officer, but they must create their own referral network.