What is Happening to Mortgage Brokers?

What a difference a burst bubble can make. Only two years ago, mortgage brokers originated more than two-thirds of new loans, according to Wholesale Access, a mortgage research firm. Now their share of the mortgage pie has dropped to 45%.

That's a shocking loss of market share when you consider that brokers were supposedly a boon to borrowers. Because they don't work for any one bank, they can (supposedly) shop dozens of lenders on your behalf to get the best loan at the lowest price.

But they seldom did. Instead, many of these mortgage brokers pocketed kickbacks from banks in return for selling borrowers unnecessarily costly loans.

An April study by the Center for Responsible Lending, a nonprofit organization working to eliminate abusive lending practices, found that among borrowers with credit scores of 640 or less, those who used brokers paid an average of $5,222 more in the first four years of their mortgage than those who borrowed directly from a bank. Borrowers with credit scores of 640 to 720 paid $1,316 more.

If shopping for a mortgage, and you want to use a mortgage broker instead of going directly to a bank, demand that your lending middleman set his fee in advance - not just what you will pay but also what he will get from the bank, which affects your rate. His or her total fees should not exceed 2% of the loan.

Have you used a mortgage broker before? Do you feel you were treated fairly? We'd love to hear your experiences, or if you have never used a mortgage broker before but know of someone who has, leave us your comment or thought on this matter below by clicking on the "commment link". We'd love to hear from you on this subject.