The
study found similar patterns of differences between brokered mortgages
and lender-originated loans in neighborhoods where 75 percent or more
of the population is either African-American or Hispanic.
Broker-originated first mortgages were one percentage point cheaper in
African-American neighborhoods and second mortgages were 1.9 points
less costly. In predominantly Hispanic neighborhoods broker-originated
first mortgages were 2 points less costly and 2.4 points cheaper for
seconds.
Georgetown's
Elliehausen, senior scholar at the university's Credit Research Center,
said the study results point to the potential economies that brokers
bring to the marketplace by maintaining business relationships with
large numbers of different lenders, especially in the subprime credit
arena.
"Borrowers
who lack experience in the mortgage market may reduce the cost of
learning about the availability of different mortgage products, terms,
and creditors through broker counseling," said Elliehausen.
A
subprime borrower or home buyer who deals solely with a single direct
lender, by contrast, is exposed to only that lender's products and
pricing.
Mortgage
brokers are middlemen in housing finance, connecting loan applicants
with mortgage lenders. They account for an estimated 60 percent-plus of all new
home loans and refinancings. Brokers obtain so-called "wholesale" price
quotes from lenders, then add on their own fee to produce a retail rate
quote to an applicant. Brokers often are very small business
enterprises in terms of staffing and overhead, and eliminate the need
for some national lenders to maintain costly, bricks-and-mortar retail
offices in many locations.
Steven
F. Skolnik, executive vice president of First Franklin Financial Corp.,
one of the largest "non-prime" wholesale mortgage lenders in the country, said
he is intrigued by the results of the study. He agreed that brokers as
a group "operate in a lower cost structure" than retail lenders, and
can cut their compensation on a given loan in a competitive situation.
However, said Skolnik, loan customers at his firm pay "about the same"
overall prices for mortgage money whether their loan was originated by
a broker or by a retail loan officer.
Dr.
Elliehausen said the million-plus sample of loans covered by the study
limits the conclusions to subprime mortgages, and does not necessarily
suggest that broker-originated mortgages are cheaper in the prime
credit market as well.
However,
given the possibility that brokers anywhere in the mortgage market have
the ability to expose home buyers to a wider array of loan choices and
prices than any single retail lender offers, it's probably a good idea
as a mortgage shopper to include at least a few brokers on your list --
along with the usual Internet, mortgage banking and commercial bank
sources. |
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