Mortgage Broker Fee Agreement - Wholesale Mortgage Lender: Fill & Download for Free

Wholesale lending defines the process of a lender providing the credit decision as well as the funding of a mortgage loan that was originated by a mortgage broker. Wholesale lenders have the underwriting authority and funds available to lend while mortgage brokers typically have a deeper presence in the marketplace than banks do and access to more loan product options.Generally, mortgage brokers enter into an agreement with a wholesale lender before they begin originating loans on the lender’s behalf. The lender is responsible for supporting the broker’s relationships with mortgage loan applicants and operating within current industry restrictions and guidelines. Wholesale lenders charge fees such as underwriting and admin fees, to cover the costs associated with this service.A broker establishes the origination of a loan and takes the application from the perspective borrower. Mortgage Brokerages are independent businesses and typically work with multiple wholesale lenders to help fulfill their customer’s borrowing needs.When a homeowner or homebuyer chooses to work with a mortgage broker, they will work with that person and their staff through the entire loan process and not directly with a wholesale lender. Their broker will assess their options with multiple lenders in the industry and presents them with the solution best suited for their needs.

Back end points are charged and it is legal. I'd say 90% of my deals are back end points paid by the wholesale lender. The key now is you need to sign a back end lender paid compensation agreement with your wholesale lender that you are tied to for a full quarter, and at the end of the quarter you can change the back end percentage points being paid to you(maybe, you will go from 1% to 1.5% for each deal). Technically, you should be at the same back end percentage with each lender, but in reality, brokers sign up with multiple wholesalers so they can make between 1 to 3% maximum per deal depending on the mortgage lender they utilize. I hope this makes sense.What did change because of Dodd-Frank is that brokers cannot double end a deal and charge upfront points, and then get back end points also from the wholesaler. You need to choose up front, what type of compensation you want, either borrower or lender paid. Lender paid is essentially what I am calling 'back end' points(people can argue over what they want to call these points), but to me it is back end points. With lender paid, the borrower pays zero up front points or origination fee, and the broker receives whatever lender paid percentage they chose from the wholesale lender(usually between 1 to 3%). For borrower paid, the borrower pays usually around 1 to 2% of the loan as a up front origination fee.Bottomline, the borrower paid option gives the borrower a lower rate and higher up front fee's, and the lender paid option gives the borrower a higher rate and lower up front fee's.

Well, before I start we will get one thing straight now:STAY AWAY FROM PAY DAY TYPE LOANS !Right, now that we have got that clear, I will continue.You need to look at the loans that you have and more to the point the APR charged (Annualised Percentage Rate) and the amount it is costing you per month. That is why I make the statement about pay day loans. Their APR are well over 900% anything up to 2500%. You will never pay the interest, let along capital.Next you look at the “term” of the loan, i.e, how long are you going to pay the loan over; e.g. 12 months, 24 months 36 months, 48 months or 60 Months.The longer you pay, the lower your instalment, but the cost of that loan in terms of interest paid over that time increases, which leads us to the next issue.How is the interest calculated?Is it interest in advance i.e. interest paid first and then the capital.Is it a “ 50–50%” loan i.e. each month you pay 50 % of the overall interest, and 50% of the capital per instalment value.The “Rule of 78ths Loan” (also know as “Front Loaded Interest”) this behave similarly to 1 & 2, but the difference you pay more of the interest in at the beginning of the loan a proportion of the instalment, until you get to the last few months where 100% of the instalment is capital only i.e. the interest paid in full.The accrual loan, also known as “revolving loan” (Credit Cards particularly) where you pay x% per month on the outstanding balance as at month end; in some cases that can be a month of 30 days; or 30 days in a month, i.e. each day accrues a debit amount of interest, which compound on the month. That gives a higher rate APR.In the case of 4. that is where you have to be careful about how the interest is compounded; and that is why Pay Day Loans are dangerous because people don’t realise that the interest is compounded and rolled over daily and the interest charged again and applied to the capital and so on; hence you come to the suicidal rates of Thousands of Percent per annum).What is the gross payment of the loan. If it is a fixed term loan, it should tell you:The amount of the cash advanced e.g. US$1 000.The flat rate (uncompounded) interest of the loan (say 12%)How the rate is compounded (daily or monthly pro-rata)The total interest of the loan.The overall loan total of the loan including the interest charges, any arrangement charges (usually that later if the loan was “brokered”, i.e. a financial advisor found you the loan or “introduced you to the lender, e.g. a car sales showroom), it should show thee commission which the advisor/showroom have been paid for introducing you.That will give you a full breakdown of how the cost of the loan and the final total of the loan against the money you pay(id) back.Then check to see if:There is a rebate of interest if the loan is paid early (become rare these days because of the way money is borrowed “wholesale”)A penalty clause of the account is settled early. As in 1. this is because it is whole sale money, known in the UK as “back-to -back lending.In short back-to-back lending is where the lender creating the loan goes in to the money markets and “Buys” US$ 1 000 000 for X% per annum over 5 years (6o months) . That market Bank may be say First Chase.That US$1 000 000, then gets broken down it to US$ 10 000 lots (just for an example). So now you have 100 x US$10 000 lots (often referred to as “Parcels”).The person now selling these parcels on charges the person taking out the loans a sum of interest per annum (APR) As above that can be spread across a number of months and depends how the interest is accrued and applied to the loan.So you go to your car show room and you buy car for US$10 000.That car show room may have “bought” the whole US$1 000 000 (usually it is a group ownership i.e. several showrooms under the same name).Each car sold will be sold to the nearest US$ 5 000.So you now have “batch” of loans totalling your US$ 1 000 000. Dealership show rooms accounting to Head Office producing the copy loan documents of each borrower.In the same way as anything purchased in bulk you get discount for voloume.So that dealership with its branches have “brokered” those loans and in their lending name (GM Card and Ford are two example). They are legitimate lenders it is just that they have created loans from their block of US$1 000 000. And called it GM Loan or Ford Loan (these are just example names. So being effectively a bank, they now “sell you” that loan at a price which is probably going to be 5 % points above the amount they borrowed it for, and in turn that gives them (in theory) a profit margin. However they are taking a “risk” in each borrower paying to time, so that they can pay their instalment to the Head Lender; i.e. First Chase in this instance.As the loan company has purchased that money at a discount, they pay less instalment due to the lower rate, so providing everyone pays to date; and the Lender you have borrowed form is say “Ford” or “Vauxhall” Credit; have had to pay their instalment to First Chase, buy because they paid 5% points less than you to borrow the money, that becomes their profit margin.In this type of back to back loan, there is a problem for the lender, but not First Chase. First Chase has created the loan and accrued the interest on the block of money it leant to Ford/Vauxhall.As Ford/ Vauxhall bought and created “parcels” of the loan, if you repay early actually it causes them a problem, since although they made the mark up, because they sold each individual loan back to First Chase (who actually you owe the money to, not Vauxhall or Ford; since they are not actually banks, just trading names.So if you settle your loan early, then that “parcel” has to be paid back to First Chase. However the loan from First Chase was a block loan not a parcel. So that loan has to be adjusted and the interest charged to Vauxhall/Ford changed again and a new “head loan” created for the other parcels of loans left in the agreement. That is expensive for all three lenders. Hence you get charged an early settlement fee.However if you had gone direct to first chase for the same loan, you would b seen as a greater risk (if you go, they go) whereas the dealer has to pay First Chase irrespective whether one party defaults leaving them to pay what was your instalment (less 5% mark up) back to First Chase, so actually the cost of their loan with First Chase has gone up (hence you don’t get a rebate for early settlement, as Ford/Vauxhall have had to pay a fee to have the loan adjusted with First Chase).So that is why you have to be very careful WHO you consolidate with and what the purpose of your loan was; more likely are you to pay it back early, or to terms to the end of the term, i.e. 60 months. That is where Credit Scoring raises its head for the end borrower; how likely are they to default?You need to read the terms and conditions carefully and not just take the APR as an absolute (you will note that most adverts will use the caveat - “representative APR”). Also whether there are penalty clauses and the form they take.OK in this (long) example I have used car dealerships. but they could be any form of lender /representative (broker) of the loan including a Store Loan.One of the reason why Store Cards are so expensive, is that like the car dealer, they buy in bulk but the card is underwritten by another lender, again as an example First Chase. However the sort of person who buys/ uses store card is a higher risk, therefore higher interest to cover that risk. Store cards are notorious for default, and in fairness that does have to be taken in to account. Particularly Christmas time, peoples’ eyes tend to be “bigger than there bellies” and over spend. As an a side one of the reasons why January and February are such a high default months. In the case of January, it hits Mr/Ms Cardholder how much the have spent during December and they were paid early (as most companies do) so instead of a 4 1/2 week month, they now have a 6 week month, followed by a 4 week month.That is a lot of “catching up to do”. Invariably the due date of the loan, is earlier than the borrower is paid their wages, they haven’t put the money by, and now they have a further 10 days from the date of the money due to the date they get paid: default.So very often that default is quite high and again that has to be incorporated in to the final lending amount. The higher risk you are (and that includes the stability of the job sector you are employed in) ratio of income to outgoings, and savings as a whole. If you own your own property, you are less of a risk (in English and Scottish Law) since if you default, and I secure a County Court Judgement, I can apply for security over your home, so if you sell it, I as lender HAVE to be paid after the Mortgagor, before the Solicitor who arranged the sale of your property givens you the balance.Thus the lenders are assured of their money. In the case of these secured loans because they are indeed “secure” (from the lenders point of view) you will pay a lower rate on your loan.The only time this varies is if you default on the loan, and it goes to Court and Judgement Secured, for “safety” the Lender (now Claimant/Plaintiff) will take out (what is known in England) a Charging Order as security.Rather like a Mortgage, if you fail to pay then the lender (Judgement Creditor) can enforce the “Charge” and sell (in effect) the property over your head. Again if they do that the sale proceeds will go to the Solicitor and then you will received the net sum less costs of the Court Order after the Mortgage and the Second Charge(ing) order are cleared.Most Credit Companies which secure a debt through a County Court Judgement with a Charging Order will not enforce it even if there is total default since the costs of doing so, means they are doing all the “donkey work” for the Mortgagor/First Charge Holder, and under a “Forced Sale”; i.e. repossession and sale at auction there may be no money “left in the pot” for even the first Mortgagee, let alone the holder of the Charging Order.So they will let either the Mortgagor foreclose, or just wait for the house to be sold “though time”, and they still know they will get the money back.Only apply to companies which are trustworthy, in your own country and have the backing of you Government, and properly approved.Chris R- London