How Mortgage Originators Lie to Consumers

1- Direct lenders originate loans for their own portfolio and/or securitization.  These companies are not limited to but include Wells Fargo Home Mortgage,  IndyMac, Flagstar Bank, National City, Ameriquest Mortgage, Bank of America Mortgage, Chase Manhattan Mortgage, and Washington Mutual.  They do not guarantee a borrower that they will work to find them the best terms, only the terms they offer.  In fact, these originators severly penalize (or prohibit) employees who "broker" a loan to another direct lender because the terms are better for the borrower. 

2- Correspondent Lenders are "Mortgage Brokers" on steroids.  They look and act like brokers inasmuch as they  submit your loan package to various direct lenders but have the ability to hide the "steering fee" as profit from selling the loan.  Correspondent lenders prepare the loan documents, fund the loan from a warehouse line (or giant credit card that the direct lenders provide for the correspondent), and sell the loan to the direct lender.  They generally use the NAMB disclosure form but can be persuaded to offer you a fee for services agreement.

3- Mortgage Brokers agree to arrange a loan for the borrower with direct lenders.  They offer the absolute best chance a borrower has to get a true fiduciary relationship.  The way to establish that fiduciary relationship is through a carefully worded fee agreement that clearly defines the duties of the originator and the amount and form of compensation.  A sample of a contract defines how lender paid compensation can replace the borrower paid compensation or augment it to pay the mortgage brokerage fee.  The service offering agreement defines the contractual relationship between the originator and borrower.

Here is the truth about mortgage originators.  We get paid by you (the borrower) AND the lender with whom we place the loan.  There is nothing evil or illegal about that; it just hampers our ability to get you the best terms and get paid for our services.  Yield Spread Premium or Lender Rebate is a form of compensation to your originator.  If you, the borrower, negotiate a fee for services with the originator at application, that acknowledges that the yield spread premium or rebate is applied to that fee, you're getting an originator that is clearly working to get you the best terms; she's going to make her fee no matter which loan program you choose. 

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