Dalrymple: Ask a banker Q & A
Ask A Banker
Question: I want to apply for a mortgage, but I don’t want to talk to someone who works for a bank. Where do I go?
Your question reflects the feeling of a lot of people. A poll a few years ago showed that bankers had replaced lawyers as the most disrespected profession.
And then there are mortgage brokers, who originate a lot of loans, and their rep hasn’t been all that good in recent years. The Consumer Financial Protection Bureau was created to fulfill a requirement of the Dodd-Frank Act effectively restructured banking and lending after the Financial Crisis. One of its major mandates was to radically change how mortgage brokers operate, including requiring a nation wide licensing system, and altering how they’re paid. But, today, both banks and brokers are doing a pretty good job of serving borrowers. The bottom line is that, when it comes to rates, fees and programs, every source is almost exactly the same, because everybody gets their money from the same place: by passing loans along to Fannie Mae and Freddie Mac, and then into mortgage backed securities.
Some big banks may create their own securities before sending them along to the two agencies, and other originators, such as smaller banks and credit unions, as well as mortgage brokers, have their loans funded by bigger lenders, but the mortgages still end up at the same place: in a security sold to investors.
The difference to the borrower lies in the service that the mortgage originator delivers. Who treats me the best, explains the process the most clearly, and gets my loan done the quickest?
The CFPB is an ardent advocate of getting people to shop for home loans. A couple of years ago, the Bureau commissioned a survey to see if people do actually shop. The answer was, not much. Rather, consumers tend to go for convenience, or to look for a loan through someone they know, or a source that’s been recommended to them by someone they trust.
To answer your question, shop for that loan source. In the process, you’ll find little difference in rates, so you’re really looking for the best service provider. You might talk to a mortgage broker, a big bank, and a small bank. If you get that warm, fuzzy feeling from one of your interviews, that’s probably the loan source you’ll choose.
Pat Dalrymple is a former bank president who has been making mortgage loans in western Colorado since 1967. He’s currently an advisor to Grand Mountain Bank’s Mortgage Lending Outreach Initiative. He welcomes your questions on lending and banking, and can be reached at email@example.com.
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