How Charlotte NC Home Mortgage Brokers Get Paid
Charlotte NC Home Mortgage brokers are paid their fees in two distinct ways. The first, is known as Front-End compensation. Those fees are charged to the borrower. The second, is called Back-End compensation, or, fees collected from the lender.
Examples of Front-End, or borrower, compensation are as follows:
–Miscellaneous fee. (Reasons can vary by broker.)
Within the Good Faith Estimate, or GFE, all but one of the above fees are usually combined into the Origination Charge, located on the first line, second page of the GFE. The only fee separate from those in the Origination Charge is the Discount fee, located on line two of the same page. Ask your particular broker for an explanation of these fees. Should he or she be reluctant to explain them, a borrower may want to look elsewhere for another broker.
All the fees listed are not necessarily paid to the broker. Some of the fees go to the broker and others are passed on to other parties. But, there is usually no way for the borrower to know which the broker keeps and which are for third party payments.
Now, examples of Back-End (lender) compensation are shown below:
Should the mortgage broker be working in the true ‘broker’ sense, arranging the financing from a separate lender, he may increase the loan rate and be compensated by that. The higher the interest rate percentage on the loan, the greater the amount the broker gets. This method is known as Yield Spread Premium, or, YSP. If this is used, there should be documentation regarding this on the GFE. However, if the borrower does not see the reference to it, ask the broker-it may be a hidden charge.
If the mortgage broker is also acting as the mortgage banker, using his own company’s funds for the loan, he or she will receive additional payment from the lending company. This type of arrangement is known as a Servicing Released Premium or SRP. This information, between the broker and his company, is not required to be listed on the GFE. The borrower will not know if the broker is receiving this type of compensation.
Every loan arrangement is done in the same manner; whether the broker works for the lender or is working as a true broker and using a variety of banks and lending institutions.
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Charlotte NC REALTOR®