Colorado Mortgage Brokers Taking All the Blame?

Almost every day I turn on the news and see a new story about different bills in the Senate or House of Representatives or Colorado's legislative branch or the Federal Reserve trying to curb the foreclosure epidemic and they are always focused only on mortgage brokers. This is especially true for Colorado mortgage brokers. A majority of the new regulations passed by the Colorado legislative branch and signed by the governor only apply to Colorado mortgage brokers.

I will agree some thing must happen to help curb the fraud and dishonest practices that have occurred in the mortgage industry. However, these new rules/laws/regulations should apply to all mortgage professionals regardless of who you work for. These problems are not specific to mortgage brokers and I'm confident that a large portion if not the majority of the issues you hear in the news are a bigger problem in the larger banks.

There have been many surveys and reports that show consumers receive better interest rates, closing costs, programs and SERVICE from mortgage brokers, than they do from banks and direct lenders. There are a few reasons for this:

1. Mortgage brokers have the ability to shop multiple lenders and find the best mortgage for their client, a bank or direct lender only has access to the products their company offers. The mortgage brokers ability to shop with multiple lenders and programs ensures that they can find the best mortgage program for you at the best rate available.
2. Mortgage brokers don't have an endless marketing budget and most of their business is obtained from referrals and past clients, so they are more likely to work harder and offer better rates to earn repeat and referral business. Repeat and referral business is not as important to loan officers at banks because they know their marketing and banking customers will always bring more clients through the door.
3. Mortgage brokers have more flexibility than banks and direct lenders because they have lower overhead, therefore, they can offer better mortgage programs at lower rates with lower closing costs. To give you an example, I have a friend that works for a large bank here in Colorado and his rates are typically 1.5% higher than what I offer and his closing costs are usually $4,000 more. Why would people pay so much more? Because consumers trust their bank and they don't shop around (banks know this and therefore charge higher rates).
4. The mortgage industry, like many sales industry, has a high turn over rate, especially within banks and direct lenders. Many loan officers that work at banks and direct lenders change company's every 6-12 months. This job hopping leads to less accountability for loan officers, as they have left the company before a borrower realizes they have received a bad loan.

Again, I think there are bad actors on both the mortgage broker and banker channels, but for some reason mortgage brokers are being singled out when it comes to new rules/regulations/laws. I believe if we truly want to protect the consumers, all mortgage professionals should be required to follow any new rules/regulations/laws including, licensing, E&O insurance, and industry education.

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