Banks Bypassing Mortgage Brokers

Subprime Mortgage - Who to blame? Who should be penalized?

MORTGAGE brokers have long served as an important loan source. Compared with the loan officer at a local bank, brokers typically offer a wider range of mortgage products from a variety of lending institutions.

But now some brokers are concerned that they might become marginalized, as some of the nation’s largest lenders move to block them from offering their loans.

The bank, which had in recent years been among the biggest lenders of mortgages originated by brokers, said that it would instead accept only loan applications taken in its retail locations and online.

JP Morgan had made decisions that is the best way to make loans that will be good for borrowers in the long run. In addition, there was an internal memo sent to employees on Jan. 13, in which executives wrote that mortgages made directly through Chase employees have lower default rates than those made through brokers. Apparently, JP Morgan wants the mortgage application under their control once again.

Some legislators and consumer advocates have criticized brokers specializing in subprime mortgages — loans typically offered to borrowers with less-than-stellar credit ratings. They charge that some brokers persuaded borrowers to apply for loans that were beyond their ability to repay. But mortgage brokers say they have been unfairly blamed for the industry’s failures in recent years. They point out that it is the lenders, not brokers, who ultimately approve a borrower’s application.

Article above provided by NY Times