The Mortgage House, Incorporated
Holland, Michigan
Muskegon, Michigan
Grand Rapids, MI

Who and What is the MMBA?

The Michigan Mortgage Brokers Association is a trade association representing the mortgage brokerage industry. MMBA currently has over 300 active members throughout the state of Michigan. MMBA promotes the industry through programs and services such as education, and governmental affairs representation. MMBA members subscribe to a code of ethics that fosters integrity and professionalism.

What is a Mortgage Broker?

A mortgage broker is an independent real estate financing professional who specializes in the origination of residential and/or commercial mortgages. There are approximately 44,000 mortgage brokerage operations across the nation that originate 65% of all residential loans in the United States*. Most mortgage brokers are small business owners employing between one and twenty employees. *Wholesale Access

A mortgage broker is also an independent contractor who markets and originates loans offered by several wholesale lenders. By offering superior market expertise and direct access to many different loan programs, a mortgage broker provides the consumer the most efficient and cost-effective method of obtaining a mortgage that fits the consumer's financial goals and circumstances.
The Primary Laws Regulating Brokers are:

State Laws

• Michigan Mortgage Brokers, Lenders and Servicers Licensing Act [MCL 445.1651 et seq.]. This act requires licensure of all mortgage brokers within the state of Michigan.
• Secondary Mortgage Act [MCL 493.51 et seq.]
  This act requires licensure of all mortgage brokers offering second liens on property.

The Office of Financial and Insurance Services’ Division of Financial Institutions (formerly Financial Institutions Bureau) enforces these state laws. Within these laws there are strict requirements for licensing, fees brokers may charge, allowable advertising practices and general practice requirements. The Division has the authority to grant, suspend and terminate licensure.

Federal Laws

• Real Estate Settlement Procedures Act [RESPA]
  Prohibits abusive practices such as kickbacks and requires advance disclosure of all closing costs.
• Truth-in-Lending [TILA]
  Requires disclosure of the cost of credit to the consumer and the terms of repayment.
• Equal Credit Opportunity Act [ECOA]
  Prohibits discrimination in lending.
• Fair Credit Reporting Act [FCRA]
  Stipulates the requirement of users of credit reports and disclosure to the consumer.

The Most Commonly Asked Questions and Answers:

Q. Why choose a mortgage broker?

A. Brokers provide consumers with choice, convenience and expertise. The broker provides the consumer with a guide through the complex mortgage lending process. The broker also offers a more extensive choice of loan programs and access to more affordable loans.

Q. How have mortgage brokers affected consumers?

A. Mortgage brokers have pioneered the “subprime” credit market, using innovative loan packages to allow low to moderate income borrowers with less than perfect credit histories to start enjoying the benefits of home ownership. Mortgage brokers have opened the door to home ownership for many consumers who may never have had the
opportunity to own their homes.

The brokerage industry plays a significant role in the mortgage lending process and the economy as a whole by increasing competition and driving down the cost of credit to the consumer.

Are mortgage brokers lenders or bankers?

Neither. A broker is a real estate financing professional acting as an independent contractor. The range of products and services offered through brokers, and by brokers, is evolving rapidly. There are circumstances when brokers may act as bankers, funding their loans, however, the majority perform origination services up to the point of funding.

Does the mortgage broker care about the quality of the loan?

Yes, absolutely. The safety and soundness of the mortgage lending community is directly linked to the success and integrity of its home loan originations. The mortgage broker must care about the continued quality of its loans or it will not survive long term in this competitive industry. Furthermore, mortgage brokers represent the single largest residential origination source today. These numbers highlight the fact that consumers who exercise their choice choose mortgage brokers.

Should brokers be regulated?

Brokers are regulated by ten federal laws, five federal enforcement agencies. In Michigan the Office of Financial and Insurance Services’ Division of Financial Institutions (formerly Financial Institutions Bureau) regulates the mortgage broker industry through the power granted to it by the Mortgage, Brokers, Lenders, and Servicers Act. MMBA supports reasonable and fair state/federal regulation of mortgage brokers and lenders.

Do brokers work for the wholesale lender or the consumer?

The broker is an independent contractor. The broker allows wholesale lenders to cut origination costs by providing such services as locating a consumer who requires their particular product, preparing the borrower’s loan package, loan application, funding process, and counseling to the consumer. Brokers help keep loan rates low due to the minimal overhead and set-up costs. The broker will advise the consumer about the loan products available from the lenders with whom the broker works, and assists the consumer in choosing a loan that most closely fits the consumers financial goals and circumstances. The consumer may choose a loan by a particular mortgage broker, or shop among other mortgage brokers or retail loan sources. With rare exceptions, the mortgage broker does not get paid for any services unless and until the loan closes. Thus, the broker has a strong incentive to provide excellent service to the consumer and to provide the lender with an acceptable loan package.

Do brokers “steer” consumers to the wholesale lender who pays the highest fees to the broker?

While isolated instances of adverse steering can occur, the mortgage brokerage industry has predominantly armed consumers with a free-market economy weapon: open and vigorous competition. Any consumer exercising his or her responsibility to shop and compare will find that loan options that are in their best interests. The combination of government mandated disclosures and vigorous competition has presented today’s consumer with unprecedented levels of choice and information. While price is an importance consideration in advocating a specific wholesale lender, brokers also make their professional recommendations based on a number of other factors which include the lender’s:

• reputation for service
• underwriting criteria
• ability to fund a loan on time
• compliance with the consumer’s requirements

As with other competitive industries, a mortgager broker that consistently steers consumers to higher-priced loans will lose customers. The most successful brokers are those that offer superior service and competitive pricing.

Why do brokers collect fees from both the consumer and the lender? Isn’t this a conflict of interest?

Mortgage brokers provide the same service to consumers as do retail loan offices that typically charge the consumer an origination fee. These services include: taking an application, obtaining credit history and appraisal, counseling the consumer on the loan process, and collecting necessary documentation.
Brokers also provide separate and distinct services and facilities to wholesale lenders. These include marketing the lender’s products and assembling and delivering a complete loan package. Lenders may pay brokers a premium, (“yield spread premium”), which may include compensation for the services and facilities, but also represents payment for the intrinsic market value of the originated loan. It is important to remember regardless of which parties compensate the broker (lender or consumer), in almost all cases the broker receives nothing until the loan closes.

For more information, visit www.mmbaonline.com.