Understanding the Difference Between Mortgage Brokers and Loan Originators
With so many different titles and jobs within the mortgage industry, it’s easy to confuse the responsibilities that each holds. While Mortgage Loan Originators and Mortgage Loan Officers (MLOs) are essentially the same role, they differ largely from a Mortgage Broker. The main difference between these titles is that Mortgage Brokers are employed by a Sponsoring Broker, while Mortgage Loan Originators and Officers are employed by a bank or mortgage company. Both Mortgage Brokers and MLOs are licensed nationally by the Nationwide Multistate Licensing System (NMLS). This guide will dive deeper into what a Mortgage Broker is and what makes that title different from other mortgage professionals.
What Is a Mortgage Broker? 카지노사이트
A Mortgage Broker acts as a middleman between the homebuyer and lender, and they must sell all originated loans on behalf of individuals or businesses. They sell mortgages through several investors or banks, operating on a commission and fee basis only. A Mortgage Broker will take a loan application and send it out to several possible financial institutions or mortgage companies before choosing the best offer.
Traditionally, banks and other mortgage lending institutions have sold their own products, but as the market for mortgages has become more competitive, the role of the Mortgage Broker has become more popular. Mortgage Brokers are always employed by a brokerage and not a bank, making them unable to approve or deny a loan.
What Do Mortgage Brokers Do?
With a flexible schedule and a myriad of different tasks, Mortgage Brokers get to enjoy something new every day. While their main job responsibility is to find the best mortgage option for their clients, there’s more that goes into their everyday duties. Here is a list of some of the responsibilities expected of a Mortgage Broker:
Attract new clients
Assess borrower’s circumstances
Analyze the market to find the correct mortgage product for the client
Go through legal disclosures with clients
Complete lender application forms
Refinance mortgage loans
Submit necessary materials to the lender
How Are Mortgage Brokers Paid?
Mortgage Brokers are paid through commissions and fees, often charging around 1-2% of the loan amount. This commission will be added to the loan amount or paid upfront by the borrower or the lender, and it is negotiable. Mortgage Brokers are required to disclose all fees upfront, and they’re only able to charge the amount disclosed. Unless they are paid upfront, Mortgage Brokers are often paid after the deal is closed. 안전한카지노사이트
For example, a Broker sells a $500,000 loan. With their 1-2% fee, they stand to earn $5,000-$10,000 on that loan.
In July of 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act was put in place to overhaul financial regulation in response to the Great Recession. This Act restructured how Mortgage Brokers are paid and put laws in place to protect clients, who previously had very little protection. Within the Dodd-Frank Act you can find Title XIV, the Mortgage Reform and Anti-Predatory Lending Act, which states that Mortgage Brokers cannot:
Charge hidden fees
Tie their pay to the loan’s interest rate
Be paid by both the borrower and the lender
Receive compensation for directing clients toward an affiliated business (i.e., a title company)
What Is a Loan Originator?
A Mortgage Loan Originator, also referred to as an MLO, is a financial professional who helps homebuyers with a mortgage application to acquire loans when purchasing property, while also performing loan origination for their clients. MLOs work closely with real estate agents, helping borrowers field the financial side of a home purchase. While Mortgage Brokers work for a brokerage, Mortgage Loan Originators are often employed by a bank or mortgage company.
What Do Mortgage Loan Originators Do?
Mortgage Loan Originators guide prospective homeowners through the mortgage approval process from the beginning of their loan application to closing on the property itself. They will take into account the client’s credit score, mortgage rates, and different lenders when originating a loan. MLOs gain a wide variety of knowledge on different types of mortgage loans and use this information to help their clients choose the best loan for their specific situation.
How Are Mortgage Loan Originators Paid?
A majority of Mortgage Loan Originators are paid on a commission basis, but compensation can vary from office to office. Some MLOs are paid on commission only, which is common for smaller state-licensed Mortgage Brokers. If an MLO is hired by a bank or larger institution, they are often given a base salary as well as commission and benefits. Some brokerages have a limit on the dollar amount an MLO can make from a single loan, which is negotiated alongside their commission fee.
The typical MLO is paid 1% of the loan amount in commission, but anywhere from 20-80% of their commission may go to their brokerage. So, what does that look like in practice?
On a $500,000 loan, a commission of $5,000 is paid to the brokerage, and the MLO will receive the commission percentage they have negotiated. If the commission for the MLO is 80%, they will receive $4,000 of the $5,000 brokerage commission.
Pros & Cons of Mortgage Brokers vs. Loan Originators
There are pros and cons to working as either a Mortgage Broker or a Mortgage Loan Originator. We’ll break down each position so that you can have a better understanding of the path that’s right for you.
Pros & Cons of Being a Mortgage Broker
Offers rates and fees from multiple lenders
You must wait on the lender for approval
Has access to different loan options and loan rates
Some lenders don’t work with Mortgage Brokers
Flexible schedule and different daily tasks
Salary is not guaranteed (based on commissions)
Pros & Cons of Being a Loan Originator
Job security and plenty of opportunities to develop your career
Often commission-based salary, which could be a pro or a con!
Ability to help clients achieve homeownership
Potential long working hours
Flexible schedule and different daily tasks
Requires discipline, especially in regards to your schedule
As a Mortgage Broker, you’re not only able to offer rates to your clients from multiple lenders, but you’ll also have access to many loan options to help you find the perfect loan for your client. You will enjoy a flexible schedule, and no two days will be the same. On the other hand, you will have to wait on the mortgage lender for approval on the loan as well as being paid on commission, which does not guarantee a fixed salary. Something else to note is that some lenders do not work with Mortgage Brokers, a trend that started in 2008 because they found that Broker-originated mortgages were more likely to default compared to mortgages sourced by direct lending. 카지노사이트 추천
Meanwhile, Mortgage Loan Originators enjoy job security within the mortgage industry, are able to help many clients into homeownership and, just like Mortgage Brokers, will enjoy a flexible schedule that changes daily. Because MLOs work with more than one client at once, it is expected that working hours may fall outside of the usual 9-5. It is possible to work more than 40 hours per week, but this is up to the individual MLO and how many mortgage loans they are juggling at any given time. MLOs will have to be disciplined in their time management to succeed, which may include creating a schedule that makes the most of their downtime.
Other Professional Mortgage Titles
There are a plethora of jobs within the mortgage industry, and each position provides vital services to help the mortgage loan process along. While many of these positions are interconnected, each job has its own responsibilities, rules, and regulations.
A Loan Officer, often referred to as a Mortgage Loan Officer, works as a representative of a credit union, bank, or other financial institution. They help borrowers through the mortgage application process and will also assist consumers and small business owners with a wide variety of secured and unsecured loans.
A mortgage bank is a bank that specializes in originating and/or servicing mortgage loans. In the U.S., a mortgage bank is a state-licensed banking entity that makes mortgage loans and sells them directly to consumers.
A mortgage banker is an individual, company, or institution that originates mortgages. Whether on behalf of an individual or company, all mortgage bankers function the same. To bankroll mortgages, mortgage bankers use their own funds or funds borrowed from a Warehouse Lender. Once a mortgage is originated, a mortgage banker can retain the mortgage in a portfolio, or they may sell the mortgage to an investor or another financial institution.
A mortgage lender is either a mortgage bank or financial institution that offers and underwrites home loans. Using specific guidelines, lenders will verify clients’ credit and ability to repay a loan. The lender will set the terms, interest rate, repayment schedule and other key aspects of the client’s mortgage.
A retail lender lends money to individuals or retail customers. Lenders can include banks, credit unions, savings and loan institutions, and mortgage bankers. Other retail lenders may include third-party lenders partnering with retail businesses to offer credit to customers.
A direct lender is a financial institution or private entity that provides mortgage loans. Direct lenders may be banks and other financial institutions. Some direct lenders are private companies that deal specifically with financing mortgage loans.
An underwriter works for an insurance, investment, loan, or mortgage company. They assess everything from a client’s credit report to their health to determine if they should take on an applicant’s contract based on their calculated level of risk.
Breaking into the mortgage industry can lead to a rewarding and lucrative career. No matter which path you pursue, The CE Shop has what you need to succeed in your mortgage career!