How the Mortgage Industry works

[Rich Rifkin]

I've been teaching this for 18 years and many have asked that give a brief explanation.

Banks, Mortgage Brokers and Lenders have the same rates and programs everywhere in the United States. An advertised special in print, radio, television or internet is no different than what Bob the bedroom broker can offer.

The Industry Heirarchy
1- Consumer (you, the public)
2- Broker, Bank, Lender
3- Correspondent Lender (a broker with a line of credit)
4- Wholesale Lender (can be a bank or instititional investor)
5- Portfolio and Servicing Investor
6- Securitizer (basically a broker who creates, buys and sells pools of loans between Wall Street and Investors)
7- Wall Street (where the money comes from)

Now I really don't suggest going to a "bedroom" broker (one who works from their house) although their nearly non-existent overhead sometimes translates to lower rates and junk fees. But still, stay away from them if you can. Your best bet is a broker or correspondent lender with a medium size officet that is approved with many lenders/investors.

Just because you walk into a bank to get a mortgage doesn't mean they are actually the lender. For example, Wells Fargo Bank is licensed very differently than Wells Fargo Mortgage, although the parent company (Wells Fargo) gives each license to use the name/logo. The heirarchy above still applies.

A retail lender must sell their loan within 120 days. Often there is an assignment at closing so you don't realize that the originating company is not actually the lender because they have the same name (albeit different license #).

Moreover, if a loan officer is pressuring you to go with them before their "special" expires it is a pressure ploy and call their bluff. They may still be a good resource but make sure you let them know you're not to be taken advantage of.

LOCK YOUR LOAN ASAP! Even if you think the rates are still going to go down, don't take the chance. Get the lock in writing from the loan officer but make sure it is also in writing that if the rates go down then you get the lower rate. It's called a "FREE Float Down" and you should demand this feature.