Banker, Broker, or Direct Lender?All are "Loan Officers", who is BEST?
When you're looking to get a mortgage loan, you may work with a loan officer, but where they work makes a difference! People often confuse the lender types even though all will glean the same results: a new home. However, it is important to understand the difference between the three types of lenders so you know what to expect from them during the mortgage application process.
[OK]: A Bank loan officer is an UNLICENSED call center representative of one lending institution, the bank, who works to sell and process mortgages and other loans originated by their employer. They usually are limited in what they can offer to only their own products, severely limiting your loan rate, cost, and product options. These loan officers represent the borrower to just their lending institution and will guide him or her through the selection, processing and closing of mortgage loan. Loan officers can be paid a commission or salary for their services. They are NOT required by any state or federal law to have an indiviual license.
[Better]: A Mortgage Broker is a personally licensed individual or firm that is the middle man between you and the actual lending institution, which can be a bank, trust company, credit union, mortgage corporation, or finance company. They will originate your loan; collect your information, then submit your application to one or more real lenders, and work with the chosen lender until the loan closes. They have no money of their own, and no underwriters. Mortgage brokers CAN NOT issue loan commitment letters (only the actual lender can - although most brokers do anyway). Brokers can receive their fee from the borrower, or be paid from the "real lender" if the loan closes.
[Best]: A Direct Lender/Mortgage Lender (This is who we are) is a personally licensed individual or firm that originates, processes, underwrites, issues loan commitments, closes, and funds their own loans with their own money. Most have in-house underwriters, and have direct access to loan products from all the big national players. If a loan product exists, they can usually offer it. Direct Lenders typically bundle and sell your loan after closing to giant Fannie Mae or Freddie Mac servicing companies. Most are also able to broker loans if needed, giving you the best of both worlds.
It is very easy to become a mortgage broker, while it is much harder to be a direct lender / mortgage LENDER. There are two primary criteria few brokers can meet. The first is a seven-figure net worth requirement. The second is an initial audit process that scrutinizes past transactions. You're ineligible if predatory lending practices are found, or questionable transactions are uncovered. Our correspondent direct lender status is hard earned and we believe it affords our loyal following of customers many benefits.
Loan officers with a direct lender will analyze your financial situation to determine which loan is the best fit for your financing needs. Direct lenders can be paid a fee from the borrower or from the lender whom they sell your loan.
Is your Loan officer Licensed, or simply registered?
There is a BIG difference YOU need to understand
Recent changes to the lending industry requires all loan officers to have a tracking number, known as an NMLS number (Nationwide Mortgage Licensing System and Registry). It should be displayed on their business cards, E-Mail, web sites, all correspondence, and most loan documents.
The display of the NMLS number may make many believe the Loan Officer is licensed. Sadly, this isn't true, and working with an unlicensed, untrained Loan Officer can cause you many headaches and hassles.
Simply put, Loan Officers at Banks, most Credit Unions, or Mortgage Companies owned by a bank are NOT REQUIRED to be licensed, take classes, pass any tests, take continuing education, or pass any state or federally mandated tests to be a Loan Officer!
It is hard to determine if the Loan Officer is simply registered, versus licensed. When looking up a loan officer, you have to go to the bottom of their NMLS identification page and look under State Licenses/Registrations or Federal Registration heading.
A LICENSED Loan Officer will say "State Licenses/Registrations" and will have one or moreSTATES listed with licensing information.
An UNLICENSED, but simply REGISTERED Loan Officer will say "Federal Registration" and the something like Federal Mortgage Loan Originator.
Who is Best? Banks, Brokers, or Direct Mortgage Lenders?
Now I am not trying to make this into a David versus Goliath story, but I am trying to emphasize the huge differences between Loan Officer training and education. As the new licensing and testing requirements rolled out across the country, many Loan Officers who have been unable to meet the new requirements, and especially those who have failed the new tests, have simply gone to the large banks to work.
Calling "1-800-Big-Bank" to get a loan??? YIKES. Here is a chart to show the differences:
| ||SAFE ACT Loan Officers|
|Bank Loan Officers (RMLO's)|
|Have Personal License||Yes||No|
|Registered in NMLS||Yes||Yes|
|8 hours continuing education each year||Yes||No|
|Personal Credit checked||Yes||No|
|Pass Tough State Test||Yes||No|
|Pass Tough Federal Test||Yes||No|
|Licensing fees and renewals||Yes||No|
|Loan Officer Designation||MLO||RMLO|
|NMLS = Nationwide Mortgage Lender System and Registry (Tracking Number)|
MLO = Mortgage Loan Officer (Licensed and Trained)
RMLO = Registered Mortgage Loan Officer (simply registered)
I think the choice is clear. Who would YOU rather be working with on the largest financial transaction of your life? A fully trained, licensed, fingerprinted, and background checked Loan Officer - or the untrained, unlicensed Loan Officer at the bank?
The funny part is the cost for the service based on rates and fees are usually about the same, if not slightly cheaper in both rate and costs. Plus non-bank lenders usually close the loans faster, and have more knowledgeable and experienced Loan Officers.
The best S.A.F.E. ACT Loan Officer (non-Bank) analogy I can use is having a choice of working with an experienced CPA to do your taxes vs. you using Turbo Tax to do it yourself, but paying the same price.
Finally, THIS IS A CLEAR REASON why people should follow my #1 mortgage shopping rule: GOOGLE THE NAME OF YOUR LOAN OFFICER before allowing them to handle the largest financial transaction of your life!