“What’s in a name? That which we call a rose by any other name would smell as sweet.” How right Shakespeare was!
We’ve been talking about the difference between lenders and the advantages of using a Mortgage Broker. You need to understand that there are two different sources of income that can be earned on a home loan.
The first income source is a “visible charge” that is fully disclosed on your Loan Estimate. This fully disclosed visible charge is “capped” by Federal Law, and is the ONLY income that a Broker can earn on your loan.
When a borrower closes a loan with a Mortgage Broker the borrower is fully aware of ALL the revenue that the Broker earns on their loan.
On the other hand, the “undisclosed income”, called Service Release Premium, paid to a bank when it sells an ‘above par’ loan into the secondary market is an “invisible charge”.
Consumers are never made aware of the amount of profit that large institutional lenders generate when they sell your loan ‘servicing rights’!
What does all this mean to you the consumer?
It means that while Mortgage Brokers are capped in what they can make on your loan and charge you NO FEES, Banks & Mortgage Banks have virtually no limits on the profits they can earn on your loan.