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First, just know that all banks are lenders. So that means the Wells Fargos and Bank of Americas of the world are mortgage lenders….not mortgage brokers.

Then we have a hybrid…a broker with a line of credit that legally gets treated like a bank for the purposes of disclosing rate bump income…yield spread or service release premium.

They will usually brag about how the “fund their own loans” or have “in-house underwriting” in their ads. These boasts are clear evidence you are working with at the very least a company who is either a direct lender or one who funds their own loans with a line of credit only to sell them at the end of the month…acting as a direct lender. This monthly pooling and resale allows for not disclosing the the YSP.

Lastly we have the pure mortgage broker. They have multiple wholesale lenders they work with, those lender perform the final underwriting of the loan, and the deal is “table funded” with the wholesale lenders money…not the brokers line of credit. True brokers sell loans one at a time at the closing table to their wholesale lender…no pooling, no acting like a lender for disclosure reasons…hence the YSP is disclosed right on the HUD1 Settlement Statement.

For these and many other reasons, we counsel all of our readers to use local, ethical mortgage brokers since they have the most stringent disclosure requirements. To learn how to find, interview, and keep honest such a mortgage broker, check out our shopping system…The Mortgage Advantage.

Now that you know the subtle differences, when in doubt, simply ask.

Good Luck!

Author: The Mortgage Insider

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