In Depth Analysis: CalculatedRisk Newsletter on Real Estate (Ad Free) Read it here.

Friday, May 25, 2007

All Your Access to Money Are Belong To Us

by Tanta on 5/25/2007 06:10:00 AM

I have argued that if a mortgage broker isn't acting in a fiduciary capacity, I don't see the point of hiring a broker. It appears I fail to understand this business. From the Wall Street Journal, "Mortgage Brokers: Friends or Foes" (hat tip, yal):

Borrowers often see mortgage brokers as their allies, searching far and wide for just the right home loan at an attractively low price. But many brokers are making it clear they don't see things that way. They are fighting efforts by federal and state politicians to impose a fiduciary duty on them to put their customers' interests first, as lawyers, real-estate agents and financial planners generally are required to do with their clients.

"The mortgage broker does not represent the borrower," says Chris Holbert, president of the Colorado Mortgage Lenders Association. "We sell access to money." The industry group recently opposed language in Colorado legislation that would have required mortgage brokers to act "primarily for the benefit of the borrower." That provision was later deleted. . . .

The National Association of Mortgage Brokers, the main nationwide trade group for brokers, argues that brokers work neither for consumers nor for lenders. Imposing a fiduciary duty would increase the risk of litigation over whether brokers are to blame for loans that go bad, says Joseph Falk, legislative chairman of the association. He adds that the group favors clear disclosures to consumers and no hiding of important details.

I had the idea that "we sell access to money, so you can't sue us" probably didn't make for a winning mission statement, so I wandered over to NAMB's website:
A typical broker has a working relationship with numerous banks and other lenders and provides the consumer with access to hundreds of options when it comes to financing a home. This allows mortgage brokers to provide consumers the most efficient and cost-effective method of obtaining a mortgage that fits the consumer's financial goals and circumstances. Mortgage brokers have helped many consumers, including low-to-moderate income borrowers with less than perfect credit histories, enjoy the benefits of homeownership.

How odd. If you read NAMB's Mission Statement rather carelessly, you'd get the impression that the broker works for the consumer.