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Banker, Broker, or Direct Lender? All are "Loan Officers", who is BEST?
When you're looking to get a mortgage loan, you may work with a loan officer, but where they work makes a difference! People often confuse the lender types even though all will glean the same results: a new home. However, it is important to understand the difference between the three types of lenders so you know what to expect from them during the mortgage application process. APPLY NOW
[OK]: A Bank loan officer is an UNLICENSED representative of one lending institution, the bank, who works to sell and process mortgages and other loans originated by their employer. They usually are limited in what they can offer to only their own products, severely limiting your loan rate, cost, and product options. These loan officers represent the borrower to just their lending institution and will guide him or her through the selection, processing and closing of mortgage loan. Loan officers can be paid a commission or salary for their services.
[Better]: A Mortgage Broker is a personally licensed individual or firm that is the middle man between you and the actual lending institution, which can be a bank, trust company, credit union, mortgage corporation, or finance company. They will originate your loan; collect your information, then submit your application to one or more real lenders, and work with the chosen lender until the loan closes. They have no money of their own, and no underwriters. Mortgage brokers CAN NOT issue loan commitment letters (only the actual lender can - although most brokers do anyway). Brokers can receive their middleman fee from the borrower, or be paid from the "real lender" if the loan closes.
[Best]: A Direct Lender/Mortgage Lender (This is who we are) is a personally licensed individual or firm that originates, processes, underwrites, issues loan commitments, closes, and funds their own loans with their own money. Most have in-house underwriters, and have direct access to loan products from all the big national players. If a loan product exists, they can usually offer it. Direct Lenders typically bundle and sell your loan after closing to giant Fannie Mae or Freddie Mac servicing companies. Most are also able to broker loans if needed, giving you the best of both worlds.
It is very easy to become a mortgage broker, while it is much harder to be a direct lender / mortgage LENDER. There are two primary criteria few brokers can meet. The first is a seven-figure net worth requirement. The second is an initial audit process that scrutinizes past transactions. You're ineligible if predatory lending practices are found, or questionable transactions are uncovered. Our correspondent direct lender status is hard earned and we believe it affords our loyal following of customers many benefits.
Loan officers with a direct lender will analyze your financial situation to determine which loan is the best fit for your financing needs. Direct lenders can be paid a fee from the borrower or from the lender whom they sell your loan.
2010 UPDATE:
BIG Bank Loan Officers versus S.A.F.E. ACT Licensed Loan Officers? You Make the Choice!
Washington has been busy protecting consumers from bad lenders right? Wrong! They have only done half the job, and sadly, the general perception by the public as to who is the better lender choice is completely wrong. Most people feel the brokers and the non-bank mortgage lenders have created all the problems. This isn't true. Just the opposite. Consider the fact that Fannie Mae, Freddie Mac, and banks make the rules, and the banks review, underwrite, and fund the loans for brokers. So who is fooling who? Fat cat banking industry lobbyist are spending your tax dollar with their bail-out money to portrays themselves as innocent victims, and have done a wonderful job getting that incorrect message sent to Washington.
Effective January 1, 2011 all Mortgage Bankers and Mortgage Brokers across the county will be require to meet new strict standard, and to be licensed according to the S.A.F.E. Act, UNLESS they work at one of the big banks!
 An exemption in the consumer protection laws allows Loan Officers at the big Interstate Chartered Banks to NOT have to follow the same rules! Who are these banks? All the big names (Wells Fargo, US Bank, Chase, Bank of America, etc.), plus plenty of smaller ones.
Now I am not trying to make this into a David versus Goliath story, but I am trying to emphasize the huge differences and implications this change will have on the consumer. As the new requirements have been rolling out across the country, many of the current Loan Officers who have been unable to meet the new requirements, and especially those who have failed the new tests, have simply gone to the large banks to work.
Calling "1-800-Big-Bank" to get a loan??? YIKES
Here is a chart to show the differences:
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SAFE ACT |
Bank LO’s |
| Licensed |
Yes |
No |
| FBI Background |
Yes |
No |
| Fingerprinted |
Yes |
No |
| Surety Bonded |
Yes |
No |
| 20 hours upfront education |
Yes |
No |
| 8 hours continuing education |
Yes |
No |
| Personal Credit checked |
Yes |
No |
| Federal and State testing |
Yes |
No |
| Complaint mechanism's |
Yes |
No |
| Licensing fees and renewals |
Yes |
No | |
I think the choice is clear. Who would YOU rather be working with on the largest financial transaction of your life? A fully trained, licensed, fingerprinted, and background checked Loan Officer - or the Loan Officer at the bank?
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CHECK YOUR LOAN OFFICER OUT on the
Nationwide Mortgage Licensing System and Registry
http://www.nmlsconsumeraccess.org
If they are NOT on this list, be very cautious about using them.
My NMLS # is 274132 |
The funny part is the cost for the service based on rates and fees are usually about the same, if not slightly cheaper in both rate and costs. Plus non-bank lenders usually close the loans faster, and have more knowledgeable and experienced Loan Officers.
The best S.A.F.E. ACT Loan Officer (non-Bank) analogy I can use is having a choice of working with an experienced CPA to do your taxes vs. you using Turbo Tax to do it yourself, but paying the same price.
Finally, THIS IS A CLEAR REASON why people should follow my #1 mortgage shopping rule: GOOGLE THE NAME OF YOUR LOAN OFFICER before allowing them to handle the largest financial transaction of your life!
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