The latest issue of Consumer Reports magazine recommends that consumers avoid mortgage brokers when seeking home loan financing.
As a result, the popular publication, which prides itself on neutrality and fairness, just angered a very large group of mortgage industry workers.
So much so that the president of the National Association of Mortgage Brokers (NAMB) fired off a letter to Consumer Reports calling it simply bad mortgage advice.
Let’s learn about what was actually said.
Consumer Reports Flip-Flopped on Brokers
- Their original article said consumers shouldn’t use mortgage brokers
- Because they could be focused more on selling you a mortgage
- As opposed to getting you the best deal on your home loan
- Now it says brokers should be considered along with other mortgage providers
The original article said, “We don’t recommend that you hire a mortgage broker to do that because he may be more focused on selling you a mortgage than getting you the best deal.”
At least, that’s how NAMB president John L. Councilman put it in his letter. The article on the Consumer Reports website included the word “generally,” which may or may not have existed before NAMB got involved.
I don’t know if it was there or not, but that changes thing a bit. In any case, it is a pretty bold statement to make, not to mention blatant generalizing.
Is It Okay to Generalize?
- Like everything else in this world, you can’t generalize
- Especially when talking about a very large group of people
- It’s not surprising that they received some major backlash
- Since you’re always going to be wrong if you try to lump everyone into one category
When it comes down to it, mortgage brokers are individuals, so to say that they will ALL just focus on getting you a mortgage regardless of the value it offers is a bit ridiculous, especially for a publication that is all about impartiality.
At the same time, I can’t sit here and tell you that every single mortgage broker out there is a great person with your best interests in mind.
That’s obvious; nobody can do that because results can and will vary when dealing with a large swath of individuals.
The same is true about lenders, banks, and credit unions, which Consumer Reports says to focus on instead.
At least they tell consumers to look beyond their “regular bank,” which is good advice. When shopping for something as important (and costly) as a mortgage, you should certainly comparison shop.
But singling out an entire group is silly, even if there are some bad eggs in the group.
Brokers May Actually Be Better Educated
- It’s harder to become a mortgage broker than it is a loan officer at a bank
- And they are scrutinized more with background checks and so on
- But you still have to do your diligence to ensure you work with a reputable individual regardless of the channel you choose
As Councilman aptly pointed out in his letter, “bank originators are not licensed, tested, or required to have the same education, as non-bank originators. They even have less stringent criminal background standards.”
Again, this doesn’t mean you can’t encounter a good or a bad loan originator from either group, but it shouldn’t give consumers a reason to completely shut out one channel.
Ultimately, the more options you sift through, the higher your chances are of landing a better deal on your home loan.
He also noted that there are anti-steering measures in place for brokers these days, requiring that they get paid the same compensation regardless of loan product or rate.
This is true, though they can still receive varying commissions from different lender partners, so it is possible to send customers to certain banks where they get paid more.
But let’s be honest, everyone’s pretty much going with a 30-year fixed mortgage these days. The exotic stuff is largely gone, and borrowers will generally only go with FHA if they have to, or if it’s significantly cheaper.
Councilman closed his letter by inviting the editors of Consumer Reports to do a ride along at some broker shops and attend a NAMB conference. And even challenged the magazine to post his letter in its publication.
That seems doubtful, but they may have already slightly edited their article to include the word “generally.”
If you were to gather up the 10K reports of mortgage brokers and servicers, you will see that they list their assets as the exclusive marketing agreements they have made with the real estate companies who feed them.
I refinanced last year and started out with my local credit union. My loan was very complicated since we did a city funded first time home buyer program. My credit union had never seen this type of loan . I spent many hrs trying to explain to the CU what I wanted and what needed to be done. Anyways I thought I will try a broker that my friend had used for his refi. I sent him a email with everything I wanted to do. The rate I wanted and the terms the city wanted. He was the only person who had seen a loan like I had. He found a bank that allowed exactly to the T what I outlined in my email. A big bank would not have been able to pull this off for sure( I tried once). He earned his money on this loan and it was worth every penny it cost me. I’m sure there are some brokers That are bad eggs but in this case a broker was needed. This refi took 4 months that was how complicated this loan was.
There you go…many brokers are really seasoned and educated individuals, unlike many bank employees…so there’s certainly value there.