Your new mortgage broker sounds like he knows what he's talking about, but how much do you really know about him? Recommendations from friends and family members are good, but not all brokers can do the heavy lifting needed for all types of mortgage lending. The tips and suggestions offered by the broker can tie you to a 15- or 30-year home loan, so taking time to research your broker's qualifications might save you from making serious financial mistakes.
Education, Certification and Licenses
A qualified loan broker has a personal resume showing college-level classes in real estate, lending and mortgage practices. A broker with a bachelor's degree is better, and a master's in a real estate-related field tops that qualification. Special certifications in brokerage areas also show legitimacy. A resume showing years of successful lending experience also signals a qualified broker. A legitimate loan representative should hold an active state license and current membership in at least one or two professional business organizations, including the Association of Mortgage Professionals and the state branch of this organization. If your broker can't produce a current, valid license issued by your state, walk away.
An independent loan broker should also have a valid state license to do business. If your broker works in a brokerage office, the firm must have a current a state business license. The business license means your broker has a state-required bond backing up his performance. Ask to see the business licenses before signing any contracts. A brokerage firm should feature the company license -- look for framed wall certificates on the office walls.
Ask your friends, family members and business associates to recommend a mortgage broker. A completed loan with a happy customer is an excellent recommendation, but dig deeper to find out the terms of the loan. Some borrowers feel satisfied with a loan based on the broker's ability to schmooze -- when the actual loan rates were less than stellar. If possible, chat with the people making recommendations about the details of the loans. Look for mortgages coming in on time during escrow and with the rates and conditions the buyer looked for when shopping for a loan. If anyone bemoans changing loans mid-escrow -- sometimes a sign of a bait-and-switch lender scam -- move on to another broker recommendation. Great loan terms separate a high-quality broker from those bringing in any old loan.
Lawsuits and Complaints
Don't assume your broker is legitimate simply because he is still doing business. Investigate pending lawsuits and complaints with your local real-estate board and area business bureaus. If your broker is new to your area, take time to call these offices in your broker's former home area. If your broker has several complaints by former clients, find a new broker.
Meeting Lending Laws
Mortgage brokers must meet state laws in offering services. The Better Business Bureau warns against using brokers promising guaranteed loans, collecting up-front money before providing any services, verbal offers of loans and collecting checks made out personally to the broker, rather than a bank or registered lender. All are signs your broker is not legitimate.
- New Jersey Department of Banking and Insurance: New Jersey Qualified Individual Residential Mortgage Broker License
- Nevada Administrative Code: Mortgage Brokers and Mortgage Agents
- MakingHomeAffordable.gov: Beware of Foreclosure Rescue Scams!
- Arizona State Legislature: 6-603 -- License; Contents of Application; Fees; Nontransferable
- Federal Deposit Insurance Corporation: Home Mortgage Disclosure Act of 1975
- Consumer Financial Protection Bureau: Consumer Laws and Regulations -- Home Mortgage Disclosure Act (HMDA)
- National Law Review: Avoiding Pitfalls in Home Mortgage Foreclosures -- Recent Changes to Michigan Law
- Federal Reserve Board: Home Mortgages -- Understanding Your Rights to Fair Lending
- Texas Attorney General: Mortgages
- TucsonCitizen.com: BBB Warns of Advance Fee Loan Company, Billerica Financial
- Federal Reserve Bank: Mortgage Shopping Worksheet
- State of Wisconsin Department of Financial Institutions: Frequently Asked Questions -- Requirement For the Mortgage Banking Industry in Wisconsin
- Indiana Secretary of State Securities Division: Loan Brokers
- Association of Mortgage Professionals: Code of Ethics
- Association of Mortgage Professionals: Find a NAMB Broker
- Ohio Department of Commerce Division of Financial Institutions: What is Predatory Lending?
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