Banks, Brokers and You
By M. J. Brenneman
Purchasing a home is likely the largest financial investment that you will ever make. Recent tax credits and countless lending programs offer incentive for Americans to buy now. Figuring out if you can afford a house and how to pay for it, stand at the top of the decision tower of home buying, and there are three main groups of financial professionals that can help you with that decision.
Mortgage Bankers who work for a bank
Mortgage Bankers are direct lenders. They fund and service loans. Mortgage professionals who work for a bank typically use only their banks programs and funds. This one-stop option provides customers with a streamlined process and direct customer service.
Independent Mortgage Bankers
These types of Mortgage Bankers lend their own funds – like an investor. They have control over most of the transaction because the loan is closing in their name. However, upon closing, they immediately sell the loan to a bank. They are also still brokers, because they offer an array of lenders and services.
The mortgage broker acts as an intermediary between borrowers and lenders. Because a broker has access to several lenders, they can offer an array of services to homebuyers. Brokers are great networkers and are typically experienced in local and national industry trends and changes.
Broker to Banker
In the local industry, one of Greenville’s top mortgage brokers, Carolina Mortgage, recently re-birthed as the product of a co-ownership between their parent company, C. Dan Joyner Realtors and Wells Fargo Home Mortgage Company. General manager of Carolina Mortgage, Brandon Kimball, is glad to put away his broker hat and start lending for Wells Fargo. “There are just no advantages of being a broker anymore,” Kimball said, “so why not partner with the best.” Wells Fargo is currently the largest lender of home mortgages in the United States. Kimball says that Carolina Mortgage will not be shopping rates, but rather taking advantage of the programs and services already in place with Wells Fargo. “Business is up way over last year,” he said, “we did this to improve upon an already growing business and this was the best thing for our agents and clients.”
In January of this year, JP Morgan Chase announced that it would end its wholesale operations and no longer service loans through brokers. Citigroup also cut back the number of mortgage brokers it works with by about 9,000. With brokers merging with banks, and banks cutting back on their deals with brokers, rumors swell that the end of the mortgage broker is near.
So what does that mean to you?
Well, it could be bad news. Fewer brokers could result in less competition in the market place and higher rates. “The banks want to get rid of mortgage professionals to reduce competition,” said Alan Rosenbaum in an interview with CNN. Alan is the founder of GuardHill Financial, a New York City-based brokerage firm. “It’s not good for consumers.”
Jill Blume, president of Greenville’s BankLine Mortgage Corporation, has been in the industry for over 15 years and views mergers between banks and brokers as a loss to the community. “If you take away the tried and true mortgage broker, you severely limit the consumer’s options for home ownership,” Blume said. BankLine is actually both a mortgage broker and a mortgage banker – an independent banker. Blume stresses, “A good Mortgage Banker [independent banker] has the ability to give their borrowers more flexibility, better pricing and usually more product options in the market place than a bank.”
Colin Philbrick, a local mortgage broker and the president of Hanover Mortgage Company, says that mortgage brokers offer more options to homebuyers. “Brokers offer choice to homebuyers,” he said, “and in fourteen years in this industry, only one of our lenders has stopped doing business with brokers.” Philbrick says that although many industries have experienced loss in today’s economy, service has not been compromised at his company. “First time homebuyers need extra time for processes to be explained to them, and we will always take the time to research and review the best possible options with them before they make their decision.”
Which direction to go?
Above all else, homebuyers need to research current programs in place. There are local and national programs for first time homebuyers: programs for teachers, programs for veterans, programs for the disabled, programs for low income, high income … you get the point. If you qualify for down payment assistance or special rates, make sure to take advantage of that!
Also, find a loan officer (one who works for a bank, independent banker or broker) who is an expert in this rapidly changing industry. You need a loan officer who is going to represent you well and fight for you. Micah Brandenburg, a mortgage planner for Pinnacle Bank, says, “Consumers need an experienced loan officer who knows how to structure loans in the most advantageous way for them.” Brandenburg encourages homebuyers to make their decision based on the loan officer, not the company they work for.
So ask your realtor, neighbors, friends and family for advice about home financing. Research local loan officers and see which individuals re-appear throughout your study. Good loan officers will use their available resources to help place you in the best quality mortgage program – whether they work for a bank, as a broker or both. Make sure the person you work with is an expert – after all, this is the largest financial decision you will ever make.
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