Mortgage Broker Fees

In the April 1 Your Mortgage column (“Learning the Lingo May Help in Selecting Home”), David W. Myers properly defined various terms in the mortgage business in most, but not all, cases. We are mortgage bankers but our company, as in the case with many similar companies, also acts as a mortgage broker.

Myers wrote that: “While a mortgage broker can locate the best loan for a borrower, he will also charge a fee for his service.”

While a few mortgage brokers do indeed charge add-on fees (the borrower is made aware of this in advance by signing an authorization for the escrow company to withhold these additional fees from the loan proceeds), the majority of the mortgage brokers are paid a fee by the lender and not the borrower.

Most financial institutions have mortgage divisions referred to as “Wholesale Departments” where the mortgage broker completely packages a loan submission for the lender’s review, and at closing the lender pays the mortgage broker a prearranged portion of their fee. If, for example, a lender’s loan fee would normally be 2% of the loan amount should an applicant go directly to a branch of the institution, this same fee is divided, with 1% to the institution and 1% going to the mortgage broker for his packaging and submission of the loan.

The borrower is paying the same exact fee but has the benefit of the expertise of the mortgage broker who has selected the lending institution offering the most favorable terms to the borrower.

CHARLES B. NORRIS

Los Angeles

Norris is chairman of Charles B. Norris Co. in Los Angeles.