There has been a lot of finger pointing at the mortgage broker community during the past few months. Everyone from borrowers to members of Congress seem to be trying to pin the blame for the nation's current mortgage mess on mortgage brokers.
The boom years of 2001-2005 saw unprecedented growth in mortgage volume. This growth created a huge demand for employment in the mortgage industry and this environment allowed and even encouraged widespread unprofessional behavior by some in the mortgage industry.
Some of this behavior was the result of neophytes flooding into the industry, but I believe that most of it was due to greed, which resulted in fraudulent transactions. There are numerous examples that have come to my attention where borrowers paid tens of thousands of dollars in unwarranted closing costs to mortgage originators, who took outrageous advantage of unsuspecting consumers just to fatten their own wallets.
Sure, one can shake fingers at those mortgage originators but most of us cannot and should not be grouped into that category. We have all heard stories about unscrupulous attorneys, accountants and doctors, too. There are bad apples in every batch. Given the fact that the majority of loans are originated by mortgage companies makes mortgage brokers an easy target for finger pointers.
When a borrower goes to a bank to inquire about financing, he only will have access to that bank's loan programs at that bank's rates. For a borrower to satisfy himself that he is getting the best loan for his needs, he will have to go from bank to bank and compare all of the options. It may be that the bank's loan officer can function as a broker also but he sure is not going to be able to refer the borrower to a loan program that is available at another bank.
Mortgage brokers have access to hundreds of loan programs through their relationships with dozens of banks and mortgage companies. As a result, a professional and ethical mortgage broker should be able to arrange a mortgage for his client that is right for his needs and one that is competitively priced. With that in mind, it is no surprise that mortgage companies are doing the bulk of the business.
On a more global scale, as I wrote in this column at the beginning of the summer, it is not fair to single out the mortgage industry as the fall guy in trying to explain the subprime crises and the fall in home prices across the nation [although Santa Cruz has escaped most of this]. As I mentioned in that column, the consumer has to accept some of the blame for not being responsible about spending and saving money and reading the loan disclosures and documents.
Peter Boutell is a mortgage consultant with Santa Cruz Home Finance, 1535 Seabright Ave., Santa Cruz, CA 95062. Archived columns are available at www.peterboutell.com.
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