Mortgage brokers

A mortgage broker acts as an intermediary who brokers mortgage loans on behalf of individuals or businesses.

Traditionally, banks and other lending institutions have sold their own products. As markets for mortgages have become more competitive, however, the role of the mortgage broker has become more popular. In many developed mortgage markets today, (especially in Canada, the United States, the United Kingdom, Australia, New Zealand and Spain), mortgage brokers are the largest sellers of mortgage products for lenders.

Mortgage brokers exist to find a bank or a direct lender that will be willing to make specific loan an individual is seeking. Mortgage brokers in Canada are paid by the lender and do not charge fees for good credit applications.

Many mortgage brokers are regulated to assure compliance with banking and finance laws in the jurisdiction of the consumer. The extent of the regulation depends on the jurisdiction. Only one state within the United States has no laws that govern mortgage lending.

Banking activities can be divided into the following:

Most banks are profit-making, private enterprises, however, some are owned by government, or are non-profits. Central banks are normally government-owned banks, which are often charged with quasi-regulatory responsibilities, e.g. supervising commercial banks, or controlling the cash interest rate. Central banks generally provide liquidity to the banking system and act as the lender of last resort in the event of a crisis.

The nature and scope of a mortgage broker's activities varies with jurisdiction. For example, anyone offering mortgage brokerage in the United Kingdom is offering a regulated financial activity; the broker is responsible for ensuring the advice is appropriate for the borrowers' circumstances and is held financially liable if the advice is later shown to be defective. In other jurisdictions, the transaction undertaken by the broker may be limited to a sales job: pointing the borrower in the direction of an appropriate lender, with no advice given, and with a commission collected for the sale.

The work undertaken by the broker will depend on the depth of the broker's service and liabilities.

Typically the following tasks are undertaken:

According to a 2004 study by Wholesale Access Mortgage Research & Consulting, Inc., there are approximately 53,000 mortgage brokerage companies that employ an estimated 418,700 employees and that originate 68% of all residential loans in the United States. The remaining 32% of loans is retail done through the lender's retail channel, which means the lender does not go through a broker.

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