Mortgage brokers got much of the bad press for our housing downturn. They were accused of selling mortgage loans to people with poor prospects of repayment.
Mortgage brokers don’t have a skin in the game of mortgage lending. They get paid once a lender makes the mortgage loan.
NPR reports: New federal rules go into effect on April 1 that will change the way mortgage brokers across the country can make money. They will no longer be allowed to earn a bigger commission for giving a customer a loan with a higher interest rate.
Consumer groups are applauding the change, but the mortgage industry says the rules are unfair and could drive lots of smaller brokers out of business.
In the past, a broker arguably had an incentive to steer potential homebuyers or existing homeowners who want to refinance their house into a loan with a higher interest rate. Of course, many honest and reputable mortgage brokers would never mislead their clients.