What’s an “Upfront” Mortgage Broker?

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When the housing market tanked, mortgage brokers took a share of the blame for steering borrowers to dangerous sub-prime loans carrying adjustable rates. When the rates jumped and monthly payments soared, many of the brokers came off looking like the bad guy.

Some investigations found that brokers eager for the bigger commissions earned on these toxic products had even pushed subprime loans on borrowers who could qualify for ordinary loans that were much safer.

There would seem to be a simple remedy for this kind of conflict of interest: avoid the mortgage broker and shop on your own using online services like this tool at BankingMyWay.com.

But many borrowers unfamiliar with the ins and outs of mortgages feel they need the guidance a mortgage broker can provide. How can they be sure they’re getting honest advice?

One way is to look for the “Upfront Mortgage Broker” certification, earned in a screening process devised by Jack. M. Guttentag, an emeritus professor of finance at The Wharton School of the University of Pennsylvania.

Guttentag’s website, The Mortgage Professor describes the common-sense criteria:

  • The broker must disclose all fees in writing before the customer applies for a loan, including details on the markup that provides the broker’s profit. That is the difference between the wholesale interest rate charged by the lender and the higher, retail rate the broker will charge the customer.
  • The broker agrees to conditions designed to put the customer’s interests first. That means recommending a loan that best suits the customer’s needs even if others would pay the broker a larger markup.
  • The broker agrees to pass on to the customer any rebates or other payments received from third parties such as lenders or home sellers.


Unfortunately, the number of brokers with the Upfront certification is limited in many areas. The Mortgage Professor site’s search tool lists only three in New York State, for instance. That’s a problem for borrowers who want to deal with their brokers face to face. In that case, you could ask your non-Upfront broker to abide by the standards listed above.

It also makes sense to use more than one mortgage broker, and to tell each one that he or she is competing with others to land your business.

Finally, don’t take anything at face value. Do some research on your own to get a sense of market rates. The BankingMyWay.com survey updates national averages every week. But there are always some market-beating deals. Currently, for example, the survey shows the average 30-year fixed-rate mortgage charging 5.151%. But TD Bank (Stock Quote: TD) is charging 4.758%, while Wells Fargo (Stock Quote: WFC) has one going for 5%.

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