Over the years there have been Boston mortgage brokers and Boston mortgage bankers that my clients have used to obtain financing for a Boston condo. The difference between the two: mortgage bankers are direct lenders and if you walked into your bank and obtained a mortgage you would have worked with a mortgage banker. A mortgage broker works with several lending institutions, which provides the condo buyer with more options, because a mortgage broker could shop a buyers application finding the best fit or mortgage product. If a buyer had a low credit score or other difficulties in their financial history a mortgage broker could find a way to get a mortgage. A new banking regulation that starts in April will now severely effect how mortgage brokers who were traditionally paid by a yield spread premium and now will be paid based solely on the loan amount.
Starting April 1, 2011 under a new compensation rule from the Federal Reserve, borrowers who get their mortgages through brokers will most likely pay less for their services and must be offered the lowest possible interest rate and fees for which they qualify.
The new rule is known as the Loan Originator Compensation amendment to Regulation Z, part of a strengthened Truth in Lending Act passed by Congress in 2008. Designed to prevent consumers from being steered into high-cost, risky loans, it covers how a loan originator — or any person or company that arranges, obtains and/or negotiates a mortgage for a client and will limit the fees a client is charged or how the how the broker is paid.