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June 20, 2013

Few are broke in brokerage

Few are Broke in Brokerage

Many notaries are broke, or nearly so. Not so with the lucrative Mortgage Broker Profession. Not to be confused with the Loan Officer, generally a bank employee, the Mortgage Broker directs lenders thru the “front end” of the system. While the Loan Officer has the final say in granting the loan, it is the Mortgage Broker who often initiates the Mortgage process. The typical Mortgage Broker will handle fewer transactions compared to the Loan Officer; but makes more money per loan compared to the Loan Officer.

Mortgage Brokers are licensed and regulated. Their allegiance is to the borrower to market to them the “best fit” loan. They actively advertise to attract clients and provide support is creating the “front end” services necessary for the Mortgage to proceed. They determine the financial status of the client often analyzing salary, tax returns and bank statements. The Mortgage Broker will assist the mortgage applicant in obtaining pre-approval and completing the lender application forms. They actively search the various bank and other financial institutions to find an appropriate mortgage loan offering. They submit the completed package seeking to obtain from the Loan Officer approval for their clients’ Mortgage Loan need.

Notaries take note: While most Loan Officers work for the lending institution, it is also permitted for representatives of the Mortgage Broker to refer to themselves as “Loan Officers”. The more “independent” Mortgage Broker is licensed and personally liable for inappropriate activities.

The Loan Officer on the other hand is an employee of the bank and is usually covered by their license and their insurance. Mortgage Brokers are licensed by the Nationwide Mortgage Licensing System and Registry. Loan officers, working for direct lenders, must register with the NMLS, but are not licensed.

Where do us notaries fit in? Well, we fit in before, during and after the Mortgage Loan is
processed. Our activities before assist the Mortgage Loan Broker in preparing the completed package for approval by the Lending Institution. Our stamps and seals on the Mortgage are required during the processing of the Loan. But how about after? Actually our work becomes very important after the Lending Institution grants the Loan and Mortgage. The selling of loans on the Secondary market is a tool for the direct lender to raise capital. In addition to the “quality” of the borrower, the “quality” of the paperwork is critical. Paperwork that passed approval for the Loan Officer to grant the Mortgage may not meet “standards” on the secondary market – making that particular loan difficult to transfer! Keep your stamp clear and clean, be sure all entries are EXACTLY proper and legible. Lending Institutions always want the option to sell the loan. Work with the system and consider the lifespan of each loan package you process.

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3 Comments »

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    Comment by Jessie Singh — July 2, 2013 @ 10:09 pm

  3. I wish to apologize for my total screw up of this blog entry. I tried to write about something I know very little (correction NOTHING ABOUT). A kindly and VERY well informed member of 123 sent me the following as private email to avoid embarrasing me “on the site” – well I DESERVE to be embarrased. I’ve just had a large dose of crow for lunch and what follows is the email I received. The sender did not want their name used. I will only say I have the greatest respect for this person and thank them for clearing the air and providing MY reader with accurate information. One note of caution: There were 3 articles on Mortgage that I should not have written. This one is the first. If the other 2 are published as part of my blog I will add the comment to totally ignore the article. These 3 were written by a fool (me) who thought he could “research” the subject on the internet and write informative articles. Dummie me, experience is what counts.

    Email sent to me:
    .
    .
    Ken,

    Your article is so fraught with inaccuracies that I wanted to write you privately, rather than publicly. This is SO not the norm for you – and I know you share my concern about the need for concise and correct information for our community. The industry IS a terribly confusing one – but that’s one of the reasons it’s so interesting. I hope you will take my comments (below, in blue) with the intended spirit. The ONLY reason I have the understanding that I do about the mtg world is because I’ve worked in all these places all my life. I can assure you, many who work inside don’t have a very clear understanding – it’s almost not possible, unless you spend 30 years trying. Anyway – I hope I am being helpful and NOT hurtful!

    Few are Broke in Brokerage

    Many notaries are broke, or nearly so. Not so with the lucrative Mortgage Broker Profession. Not to be confused with the Loan Officer, generally a bank employee, the Mortgage Broker directs lenders thru the “front end” of the system. While the Loan Officer has the final say in granting the loan, it is the Mortgage Broker who often initiates the Mortgage process. The typical Mortgage Broker will handle fewer transactions compared to the Loan Officer; but makes more money per loan compared to the Loan Officer.

    The term “loan officer” is common, but their actual title is “Loan Originator”. An L/O is ANYONE who originates loans, whether it is for a bank, a direct lender or a broker. The Mtg Broker does not direct lenders through the “front end”, the broker is the client of the wholesale lender(s) with whom he contracts with. The L/O NEVER has final say in granting a loan – the U/W does (either his own, or the wholesale lender’s). The L/O must be an employee or I/C with either a Mtg Banker/Lender or Mtg Broker; suffice to say the bank/lender or broker would profit from each loan of all their L/O’s, while each L/O will only profit from their own originations.

    Mortgage Brokers are licensed and regulated. Their allegiance is to the borrower to market to them the “best fit” loan. They actively advertise to attract clients and provide support is creating the “front end” services necessary for the Mortgage to proceed. They determine the financial status of the client often analyzing salary, tax returns and bank statements. The Mortgage Broker will assist the mortgage applicant in obtaining pre-approval and completing the lender application forms. They actively search the various bank and other financial institutions to find an appropriate mortgage loan offering. They submit the completed package seeking to obtain from the Loan Officer approval for their clients’ Mortgage Loan need.

    Mortgage Brokers, banks, retail/wholesale lenders AND all Loan Originators are licensed and regulated. Most states already required this, but for those that didn’t – the S.A.F.E. Act took care of that (Federal).
    A bank has L/O’s who originate loans; a bank funds their own loans, and this is an example of Direct or retail Lending.

    A lender can be a direct lender who is NOT a bank (Quicken, for example); a lender can engage in both direct/retail lending AND wholesale lending (Quicken does this as well). Flagstar Bank is a bank, a retail and a wholesale lender – and the retail division also brokers loans (as a Mtg Broker) to other wholesale lenders (when Flagstar does not have an appropriate product of their own to fit a particular borrower’s needs).
    A Mortgage Broker typically has L/O’s who originate loans (although it would be possible for a licensed broker to be a one-man operation); the Broker has contractual relationships with numerous wholesale lenders, to whom the processed loans are submitted for U/W, approval & funding.

    Loan Officers/Originators do not U/W or “approve” loans.
    *You can compare the Mtg Broker to a Real Estate Broker – the RE Broker is licensed, and RE Agents are also licensed, and work for/under the RE Broker. Loan Originators work either for a bank, a mtg broker, or a direct/retail lender with the same hierarchy.
    A brokered loan is submitted to a wholesale lender for U/W approval & funding. Wholesale lenders do not originate any loans, and do not have L/O’s – they have no direct communication or relationship with the borrower until the loan is closed/funded. Wholesale lenders have “Account Executives” (called AE’s) who are the liaison between the originator and the wholesale lender. AE’s assist the L/O’s in properly processing loans for submission, and offering direction to the appropriate loan product to submit for. The lender’s U/W review the submitted loan, issue approvals and/or conditions for approval – this information is delivered back to the originator, who relays the information directly to the borrower.

    Notaries take note: While most Loan Officers work for the lending institution, it is also permitted for representatives of the Mortgage Broker to refer to themselves as “Loan Officers”. The more “independent” Mortgage Broker is licensed and personally liable for inappropriate activities.

    The Loan Officer on the other hand is an employee of the bank and is usually covered by their license and their insurance. Mortgage Brokers are licensed by the Nationwide Mortgage Licensing System and Registry. Loan officers, working for direct lenders, must register with the NMLS, but are not licensed.

    As I stated above, all Loan Originators (loan OFFICER is just a slang term) must be licensed AND registered. This is Federal law (S.A.F.E. Act).
    Where do us notaries fit in? Well, we fit in before, during and after the Mortgage Loan is
    processed. Our activities before assist the Mortgage Loan Broker in preparing the completed package for approval by the Lending Institution. Our stamps and seals on the Mortgage are required during the processing of the Loan. But how about after? Actually our work becomes very important after the Lending Institution grants the Loan and Mortgage. The selling of loans on the Secondary market is a tool for the direct lender to raise capital. In addition to the “quality” of the borrower, the “quality” of the paperwork is critical. Paperwork that passed approval for the Loan Officer to grant the Mortgage may not meet “standards” on the secondary market – making that particular loan difficult to transfer! Keep your stamp clear and clean, be sure all entries are EXACTLY proper and legible. Lending Institutions always want the option to sell the loan. Work with the system and consider the lifespan of each loan package you process.

    Notaries are NOT involved in any part of a mortgage loan prior to ‘closing’ – nothing in any application package is notarized. There is currently a hot debate, in fact, as to whether or not an independent contractor can legally engage in ANY part of a mortgage loan application process, including clerical or administrative duties, without licensing through the NMLS (per S.A.F.E. Act). The Act, like all laws, is ambiguous to some and clear to others – i.e. up for legal interpretation. It’ll likely become clear after the lawsuits begin.

    Comment by Kenneth A Edelstein — July 10, 2013 @ 10:50 pm

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