Definition of Mortgage Brokering
Mortgage brokering is the act of locating and securing a mortgage lender for a borrower and vice versa.
The person or company in the business of mortgage brokering is referred to as a mortgage broker. When a borrower seeks the services of a mortgage broker, the mortgage broker will seek out mortgage lenders to match the borrower with the best possible lender for their needs. A mortgage broker can also locate borrowers for a mortgage lender and is usually paid through commission.
Like a loan officer of a bank, a mortgage broker will assist a potential borrower in the preparation of a mortgage loan application, supporting documentation and explanation of the mortgage transaction. Unlike a loan officer, who normally works for a single lender, a mortgage broker is often independent free to seek out multiple lenders for a particular borrower. Also, unlike a loan officer, a mortgage broker is not an employee of the lender and does not loan money or directly provide mortgages.
Upon receiving a mortgage application and documentation from the borrower, the mortgage broker will then contact multiple lenders, including banks, to determine who has a mortgage product with the most favorable terms for the borrower.
Example of Mortgage Brokering
Mr. McGillicuddy meets with a loan officer at a Bank in order to obtain a mortgage loan. The loan officer will normally be limited to offering mortgages products offered by Bank X.
However when Mr. McGillicuddy meets with a Mortgage Broker in order to obtain a mortgage loan. The Mortgage Broker has the ability of offer mortgages products from numerous lenders.
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Regulation of a Mortgage Brokerage
In Canada, mortgage brokers are regulated by the provinces, with each having its own rules and regulations. Generally, brokers must be licensed, follow a code of ethics and complete a written examination. These regulations are intended to insure a certain level of competency and honesty within the industry. Some of the employees of the mortgage broker are licensed also, such as a Licensed Mortgage Broker. The largest association serving the mortgage broker industry is the Canadian Association of Accredited Mortgage Professionals.
Growing Popularity of Using a Mortgage Brokerage
Dealing directly with a single bank has been the tradition method of obtaining a mortgage for many years. However, recent findings of Maritz Research Canada has discovered that using a mortgage brokerage is becoming increasingly popular, especially among younger borrowers. In 2013, 40% of mortgages involved mortgage brokers.
2013 CAAMP Annual State of the Residential Mortgage Market
First Foundation is an Alberta based mortgage brokerage that offers numerous mortgage products for its customers. We have relationships with a variety of lenders in the industry so we can provide you with a wider range of options than a typical bank.
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If you are interested in learning more about mortgage brokering, please feel free to contact us today!