Four Questions To Ask Your Mortgage Broker

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Anything we write about the ethics of mortgage brokers seems to touch a nerve, so here’s more. From The Wall Street Journal, ‘Four Questions to Ask Your Mortgage Broker:
1) What will be your total compensation, from me and the lender, for any loan you help me obtain?
2) Will that compensation depend on what type of loan I choose, the interest rate, or any prepayment penalties?
3) Are you willing to work for a flat fee specified in advance and rebate to me any compensation beyond that level that you get from the lender?
4) How many lenders do you work with on a regular basis? Do any of them account for a majority of your business?

Additional points from the Journal story: ‘(This) doesn’t mean consumers should shun all brokers. Many provide good service and can help people sort through the complexities of choosing a loan. Consumers don’t necessarily get a better deal by going directly to lenders, which also can charge excessive rates and fees.’

Most important point last: The Journal reports, ‘California is an exception. A 1979 ruling by the state Supreme Court established that mortgage brokers there do have fiduciary duties. Pete Ogilvie, president-elect of the California Association of Mortgage Brokers says that hasn’t caused him any problems and clarifies his role.’

That last part, as I read it, means that a California-based mortgage broker has a legal duty to put the borrower’s interests first -- which is interesting, because no one has mentioned that legal duty in comments or emails.

Comments? Feedback? Your thoughts are always welcome.