New Laws to Regulate Mortgage Brokers.


In the wake of the worst mortgage crisis in USA history, lawmakers and consumer rights groups are forging ahead with proposals to more tightly regulate America’s mortgage brokers. Mortgage brokers are different from traditional loan officers because rather than simply working for a single bank or lending company they represent numerous lenders. Their job is to help find the best rates and loans for their customers by doing the background research and comparison shopping required to find those loans, and the best mortgage brokers work with a reliable network of lenders that are capable of providing competitive loan packages and interest rates.

But it has come to light in recent months than many of these brokers do just the opposite, by pressuring clients into inappropriate loans. Rather than saving the borrow money, these unscrupulous mortgage brokers put them into the loans that pay the highest sales commissions and finder’s fees, so the broker makes money at the expense of the client. In fact, some brokers have criminal records or have been banned in one part of the country but are still in business elsewhere. The reason for such behavior is that the entire mortgage broker industry is largely unregulated, and the federal government does not have a consistent nationwide program for screening, testing, certifying, licensing, and keeping tabs on these brokers.

All that is about to change if proposed new laws go into effect. Already the states of Idaho, Iowa, Kentucky, Massachusetts, Nebraska, New York and Rhode Island have stiffened their regulations, and most other states are expected to do the same within the next year or two. Brokers will be required to get licensed and will be subject to penalties and fines if they fail to cooperate with authorities by following ethical and professional rules and regulations.

This is good news for consumers, because tougher laws and enforcement will help to put a stop to mortgage broker fraud. Legitimate and upstanding mortgage brokers in the industry – whose reputation has been tarnished by reports of corruption – should also benefit from these tighter rules which will help to reinstate integrity to their valuable profession. Meanwhile, before doing business with a mortgage broker, be sure to check their credentials and verify that their previous customers were satisfied enough to recommend them to others.

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