I entered this business because in previous businesses I never felt as though I was helping anyone. My job is to help not hurt! I love my job, I like and respect my clients, and at the end of the day I’m proud of the work i do. Even in this very difficult lending environment my thought is to work harder, be smarter, and provide exceptional customer service, not to devise new ways to rip off the client.

I look at each loan as the begining of a family tree. If I provide a competitive rate, low costs, and provide exceptional service I’ll reap the rewards of referrals and a growing family tree.

I’m personally embarassed by the article and will continue to conduct myself professionally and work for and in the best interest of my clients………and i have the references and referrals to prove it.

Joe, you are like many of the Newspapers that just want to sell copy. I am sure you could write a story about anything and find the bad side of it. Try educating the consumers with facts and point them in the right direction. There are good Brokers, Lenders and Banks out there. Buyer Beware, there are Bad Brokers, Lenders and Banks as well.

Bill Nickerson

Thanks.

It’s so much nicer to get a thoughtful response like yours, instead of the “fuck you, asshole” posted by lotides.

First of all, $3,000 seems like a steep fee to organize a loan, but if a broker were to say upfront, that’s what we charge, and if you’d like to hire us that is what you’ll pay, nothing more and nothing less – that seems like fair and transparent business. If any rebate were returned to the consumer (or deducted from the fee) this is a reasonable arrangement.

Additionally, a consumer could hire a broker based on either a lower fee, higher levels of service, or a broker who worked with a bigger network of lenders, etc. In any case, the consumer need not fear his broker under this scenario. This seems a more honest model.

Next, I’d like to address you comments on commissions. I think the analogy of a lawyer working on commission is flawed for several reasons:

1. A client need not work with a lawyer on contingency if he doesn’t want to. Virtually all lawyers will work hourly. Contingency cases are only the norm when there is money to be recovered and the client can’t afford to cover the costs up front, or bear the risk. The attorney also bears risk in the transaction, as some contingency cases pay nothing.
2. When a client and a lawyer agree to work on a contingency basis, everybody knows the percentage up front and the client can easily shop the deal.
3. MOST IMPORTANTLY: The Attorney has a fiduciary responsibility to the client and only earns more by getting more for the client. This same basic model is true with a real estate agent. However, since they earn such a small percentage of the transaction, they are really not driven to squeeze every dollar out the way they should (see Freakonomic for a great explanation of this.)

The problems listed are not problems with brokers as a group. They are problems of moral hazard that can occur everywhere. I’ve lost deals because I would not cross a line to trick someone, and I suggest that there are consumers (not all of them) out there who refused to listen to sound advice and went with the deal that was too good to be true.

Coming up with additional ways to restrict broker compensation, in my opinion, is not a realistic solution and only stifles competition. You would effectively drive brokers away from this business and leave consumers with fewer options. Banks are the alternative to brokers, but you get fewer choices with individual banks because they will only sell you what they have to offer while a broker can source the best deals from multiple wholesale sources. Some banks would probably love to see brokers close up so they can make even bigger margins.

Working on commission is not uncommon. Realtors do it all the time . . . anyone have a problem with Realtors getting paid their percentage? Joe Consumer you said, “Would you accept a lawyer profited by from manipulating a deal or an accountant that modified his advice for kick backs? Of course not!” I don’t know enough about accountants to comment on their compensation, but I do know they can be retained for advice and offer additional services. Many attorneys work on contingency which means they make big dollars or nothing — 30% of a settlement seems like a lot but I believe that’s common practice.

Finally, there seems be a lot of misunderstanding about rebate paid from lenders to brokers and origination charged by brokers. Both can be extremely beneficial to our customers.

Let’s say, for example, a broker needs to generate $3,000 in commission which is reasonable. That would be 0.50 points for a $600,000 loan or 2 points for a $150,000 loan. Assume both are 30-year fixed rates. If both loans take the same amount of work, each would make sense. That $3,000 could be earned as rebate or origination. The rebate scenario would have a higher rate than the origination scenario. Paying the origination and recouping your fee through lower monthly payments over 5 year period would be a good investment if you were sure of keeping the property and loan for a longer term. Choosing the higher rate with no origination would be more beneficial to a consumer who wants the security of a long-term rate but thinks they might sell or refi in less than 5 years.

The bottom line is mortgage lending is not always as simple as it’s made to appear. You should choose to work with someone knowledgeable who has good references. A good broker can save you a lot of money and sleep.