When you get a mortgage there are two possible retail origination channels that your loan can be funded through, a mortgage banking channel or a mortgage broker channel. The mortgage broker channel has taken a lot of heat over the past several years for delivering a lot of the 'toxic' mortgages which contributed to the housing crash of 2007. The truth is that both rogue bankers (think corporate boiler room call center operations) and rogue brokers (think short sighted, get rich quick personalities) alike purposefully matched unqualified borrowers to untenable mortgage products in the heyday of the housing mania. Since 2007, the industry has returned to a more normal state of affairs with most of the bad apples either going under financially or being fenced out by higher licensing standards.
The first thing to understand is that the same type loans are funded through both channels and getting the lowest rate or closing costs is not dependent on the channel you use. The main difference between the two channels comes down to control over the loan process in the case of banking, and the ability to offer more loan options or flexibility (pricing, guidelines, and time frames) in the case of brokering. Good arguments can be made from both sides as to which channel is the best, but there is an irony because what is posed to be the superior benefit of each channel can also be its greatest weakness.
In the case of banking, control over the loan process is achieved by handling all the aspects of originating the mortgage in house. This is a great benefit so long as 'the house' is running an efficient operation and offering competitive interest rates and fees. Because retail mortgage demand is inconsistent and swings up and down quickly when there are changes in interest rates and the real estate market, there are times when a mortgage banker becomes overwhelmed with loan volume. Unexpected volume can stretch the loan process from weeks to months and encourage bankers to raise their rates to help slow the incoming volume and increase their per loan profitability.
Brokering, on the other hand, maintains the advantage of having access to the loan offerings of many different mortgage sources. This is particularly attractive for applicants whose current, specific situation puts their application near the edge or outside of typical underwriting guidelines. Whether the issue is employment, income, credit, qualifying ratios, loan-to-value, loan amount, property type, property characteristics, loan purpose, source of funds, properties owned, or vesting; having multiple sources of funding helps 'thread the needle' and can turn a denial into an approval, provide better a interest rate, or the most desirable structure for the loan. This being said, the benefits of brokering are limited to the resources and skills of the mortgage broker. If a broker only has one source, or does not process enough loan volume to maintain a solid understanding the various guidelines at their disposal, the assumed benefit may not exist.
As a mortgage originator, I have years of experience working in both the banker and broker channels and determining which is best for a particular loan application. Stratis Financial is licensed in the State of California and we fund mortgages as both a mortgage banker and a mortgage broker. This gives us the best combination of control and flexibility to serve our clients' specific funding requirements with the best execution of interest rate, closing costs, and service. If you are interested in learning which funding channel best suits your situation, please send me an e-mail or give me a call.
