Credit Unions, Banks and Brokers…OH MY!!!

Recently I found myself drawn into a blog on Rain City Guide.  The topic that got my attention is authored by Jillayne Schlicke titled “Hot or Not” which featured various tips for first time homebuyers from an USA Today article.   The specific “hot” tip that forced me off of the sidelines and onto the paying field (it was New Years weekend…football…etc.) was: 

"Hot:  The author also suggests comparing rates and fees from three different lending sources: a mortgage broker, a banker and a credit union". 

After a few friendly banters back and forth debating our points, I realized what my real issue was…it’s not the institution, it is the person.   I do believe that a broker is going to offer a consumer more products and rates from many different sources than a bank or credit union…and I’ll still stick by my guns to say a “licensed originator” (banks and credit union loan officers do not have to pass background test and exams and be licensed) is probably better suited to serve a consumers mortgage needs.   Credit unions and banks typically just offer their products and rates.  If a bank loan originator elects to "broker" and not use a bank product, they are often paid a lower commission.   Brokers typically work many different banks (For example, the Broker I work for, Mortgage Master, works with over 80 different lenders, banks, etc.) and all of their products and rates.   

My recommendation is that a consumer should, instead of going to a bank, credit union and mortgage broker for rate and fees, consider these three options:

1)      Referral from a family member, co-worker or friend who has just bought or refinanced their home.

2)      Recommendation from their Realtor and, ask the Realtor why they prefer the lender over others.

3)      Recommendation from their CPA or CFP for the lender they endorse.

If a consumer does not yet have a Realtor, CPA or CFP, then I would recommend they ask a friend, family member and a co-worker for their lender.   

The whole idea of rate shopping is misleading and a potential for disaster for home buyers or people who want to refinance. A rate shopper really needs to be educated before picking up the phone, going to the internet, or picking up the "liars list" in the newspaper.  It really does come down to the individual providing you the quote, their ethics and expertise…how do you measure (or “shop”) for that? 

A mortgage is one of the largest investments most people will make in their lifetimes.  I cannot imagine allowing anyone providing me advice unless they could demonstrate they are competent, dedicated, educated and equipped with the latest mortgage programs available.   

Does licensing or an earned designation prove this?   I think it’s a step in the right direction.   I am one of the few loan originators in the fine State of Washington (grey, rainy and windy today) who has taken the steps to become a Certified Mortgage Planning Specialist (CMPS) and who is looking forward to having brokers become licensed…it’s just too bad the licensing does not apply across the board to EVERYONE originating any type of mortgage loan.   Alas, it’s only for Mortgage Brokers (Countrywide, Washington Mutual, Wells Fargo, Chase Manhattan are just a few of the loan officers who will not have to pass the test).    I predict that once the testing takes place (estimated mid 2007) you will see a shift of loan originators who use to work for brokers, leaping to mortgage banks to either avoid the test and background test, or because they could not pass the states requirements.

The true test of mortgage broker licensing will not be known to us until we actually take the exam late this year.    Measuring the ethics of anyone, let alone a loan originator, can be a tricky task…I guess that’s where I keep coming back to getting a referral from resources you trust.