From: "Jeff Strickland"
Newsgroups: alt.org.natl-assn-mortgage-brokers
Subject: Re: Mtg Broker, Mtg Originator, Mtg Lender, Mtg Banker. Help!
Date: Fri, 10 Nov 2006 21:36:20 -0800
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>A general question. Please define in 1-2 liner responses what each of
> these
> are and how they differ.
>
> Direct Lender
> Mortgage Originator
> Mortgage Lender
> Mortgage Banker
> Mortgage Broker
>
Find a Mortgage Broker that you think you can trust. The broker gets rates
sheets from lenders and bankers every day, sometimes more than once a day.
The Originator is the loan officer, he could work at either a bank or a
brokerage. Lenders generally operate in the wholesale arena and offer
products through brokers, so you don't usually make direct contact with a
lender. Mortgage bankers and direct lenders are two names for essentially
the same thing. A mortgage banker lends his own money, as does a direct
lender. They might have a bit more flexibility on the guidelines and
qualifications, but they usually only have one or two programs. If you are
not a good fit for the product(s) they have, then you've spent time and had
credit reports pulled that are of no use and could actually be bad in
certain circumstances.
I like brokers because if there is a product they fit to you, and there is a
change in rates, then can flip the loan to another lender (assuming the
original lender won't give the adjustment) and adjust the loan downwards to
the new rate. Maybe the borrower is problematic, or the appraisal report
comes in a bit low. The broker can find another lender or banker that has a
program that fits the new scenario.
> I'm shopping refinancing options. I've run into all of the above
> variations
> so far. In general I know that a mortgage broker farms out my business
> to a lender, and acts as my agent, and makes a commision from the
> lender. But I may be wrong. The difference between a direct lender and
>
> an originator is unclear to me.
>
> I've heard "We're a {fill in from above}"
>
> Can someone in this forum define the ones above, and perhaps fill
> in the one or two I havent heard yet?
>
> Thanks
> MPD
>
I used to work for a broker. In that capacity, I originated loans. I was a
loan officer, or loan originator. Bankers and direct lenders also have loan
officers, originators. So, originator is not a very useful term.
The real sign of a good mortgage product is the APR. Allow me to try to
explain.
Let's say you want a new loan of $300,000 to refi your house and roll in
your credit cards and fix the roof. Whatever. ANY loan has fixed costs that
can not be avoided. (I haven't got my loan calculator handy, so the figures
I give are for illustration only and will not calculate out accurately.)
Lets say that the loan rate is 6.000%, and has $5000 in fixed costs. The
payment on 300k at 6% is $1800 (rounded). BUT, you do not get 300k, you only
GET 295k because even if you take 5k from your checking account to pay the
fixed closing costs, the bank is effectively taking the first 5k FROM YOU,
leaving you with 295 to work with. Your payment remains at 1800, but the
loan proceeds are only 295k. The 5k in costs is expressed in Annual
Percentage Rate (APR). The 6.000% rate with 5k in costs equates to an APR of
6.250 (for example, this is the part where I need my calculator).
You can pour over two or three disclosure statements and compare all of the
costs (only fixed costs), or you can jump to the form with the APR on it.
Assuming all of the programs you are looking at are at 6.000%, the one with
the lowest APR has the lowest fixed cost. If one has 6.250 and another has
6.175, the one at 6.175 is the cheapest loan to get. The payment is the same
on each loan, but the up-front costs are lowest on the loan with the lowest
APR. You do not need to compare dozens of fees that give you a headache,
simply jump to the APR page and make a decision.
Fixed costs are stuff like insurance, various fees, title report, loan
officer commission, broker fees, etc. Variable costs are those which are
pegged driectly to the loan, days of interest come to mind. One broker might
have 25 days of interest and another might have 5 days. Nobody knows how
many days of interest that need to be paid when the initial disclosures are
prepared. When the loan is closed, some number of days of interest are
collected to get the new loan to the 1st day of the following month, then
your payments are always due on the 1st, beginning with the month that skips
the month in which the loan was closed. Mortgage interest is always paid
after it is earned, car payment interest is paid before it is earned. You
live in the house for a month, then pay the interest that came due while you
lived there. You drive a car for a month, but you pay the interest that will
come due during that month. Do you see the difference? Days of interest are
not part of the APR calculations.
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