July 11th, 2014
Do you know the difference between Borrower paid or Lender paid compensation for mortgage loans? The Dodd Frank Act 4/6/2011 states that a Mortgage Broker must give the borrowers the option of these two ways to proceed with their loan: Borrower paid means that the Borrower will pay the Mortgage Broker fees, and Lender paid means that the Lender will pay the Broker fees. If Borrower paid, the Mortgage Broker and Borrower can negotiate what will be charged and if any other processing, application, etc. fees will be added.If this is a purchase and the Seller is paying closing costs, these costs can be used to help pay these fees. This type of compensation can effectively get the Borrower a lower % rate IF they are willing to pay the Broker, although many Borrowers do not wish to have to shell out this money ( this $ can be added into the loan if a refinance). If the Lender is paying the Broker, only the % compensation plan $, set up in advance with the Lender will be allowed with NO other ancillary costs, such as processing or application fees. This "Comp Plan" is set up w/ each Lender that the Broker uses for 90 days at a time and can not change during that time period, no matter the size of the loan. The rate the Borrower gets from the Lender depends on the comp. plan set up, as these broker fees are adsorbed into the Lender's rate. The Broker CAN have different % comp. plans set with the various Lenders. In THEORY, this helps the borrower to be able to shop to get the best deal ( the lower the comp. plan should equal the lower rate). Great THEORY, but ONLY IF the Borrower knows all this and will shop Mortgage Brokers for the best deal. This is why if a Realtor MUST direct a client to a Mortgage Broker, at least 3 should be offered so the client can shop and not just be led to the Realtor's buddy. If a Mortgage Broker quotes a rate to the client he/she is supposed to inform the Borrower what comp. plan they are quoting with the rate offered. Again, great theory IF the Mortgage Broker obeys the rules and discloses this info.........For UP FRONT AND FAIR REPRESENTAION AND EDUCATION please call Diversified Mortgage Brokers, Tel: 434-237-3143, Email: email@example.com, Web: www.diversifiedmortbrokers.com. LET US BEAT YOUR BEST DEAL!!!!!!!!!!!!!!!!!!!!!!!!