In a recent article I found that was written by Consumer Reports, the editors encourage borrowers to shop around for mortgages online and deal directly with large banks instead of working with licensed mortgage brokers. The article questions the value that a qualified mortgage broker brings to the table, yet the main ideas are based on inaccurate information.
This is a surprising update and a definite cause of concern, especially considering the reputation that Consumer Reports has for advocating on behalf of the consumer.
Recognizing the need to issue a public response, John Councilman, president of the National Association of Mortgage Brokers, said that the truth of the matter is that “recent surveys show consumers would have saved money, received better service, and had greater consumer protections had they gone to a mortgage broker rather than to one of the too-big-to-fail banks the story recommends.”
With the financial crisis still fresh in the minds of many people, the reputation that big banks have is far from stellar. In his rebuttal to the Consumer Reports article, Councilman goes on to assert that, “Consumers should be aware that bank originators are not licensed, tested or required to have the same amount of education as non-bank originators. They have even less stringent criminal background standards."
In contrast, the National Association of Mortgage Brokers has actively worked to support efforts aimed at cleaning up the industry. Many of its efforts have been successful and mortgage brokers are now among the most highly qualified in the origination process.
The Consumer Reports article correlates to advice I found in the Consumer Financial Protection Bureau’s (CFPB) “Shopping for your Home Loan: Settlement Cost Booklet,” which may not be in the consumer’s best interest to read. The booklet advocates that potential borrowers should get three offers for financing from lenders, in writing, prior to making a final decision.
Sounds like common sense doesn’t it? Unfortunately, the impact of getting three offers in writing would be that a borrower would have three credit scores pulled on their behalf. This could bring about a negative impact on borrowers at the lower end, and it could potentially impact borrowers with a higher credit score.
Of course this depends on the amount of emphasis a lender places on a borrower’s credit score, but the point is that even a one-point difference can mean thousands of dollars in savings. Even if the impact from running a credit score three times appears to be only marginal, the impact on a person’s long-term financial health can be significant, and the extra hassle slows everything down.
Opting to work with large banks and shopping around online might seem like the best choice. The reality of the situation, however, is that the service offered by the lowest-cost providers is typically aligned with their prices. Consumers who shop for service over price usually have higher savings, increased levels of customer satisfaction and more protection of their best interests. For a free assessment about your purchasing power, contact me.
Patrick Stoy has 16 years of mortgage lending experience. Patrick is CEO of Wilmington-based Market Consulting Mortgage, which he started in 2005 with a mission to build lifelong customer relationships by providing real value. To learn more about Marketing Consulting Mortgage, visit www.macmtg.com. Patrick can be reached at [email protected] or 910-509-7105.