The role of mortgage brokers in the recent foreclosure issue in the US is very little understood by the people in general. It is unbelievable that sixty to eighty percent of total home loans are initiated by these powerful brokers. They play a key role in the mortgage industry yet their intentions and presence is not altogether understood. Their participation and interest in the process of the loan is also not clear to the borrowers as a whole.
The question raised is whether these mortgage brokers work sincerely to bag the best deal for their clients. It is found in uncertain and non-transparent terms that the mediator is on the lookout to push high cost, high risk loans in order to maximize his gains and at the same time trying to convince borrowers that they have found the best deal available. (The statement does not apply to decent people, who are rare in all professional fields in recent times).The rising reo foreclosures rate in the country has proved otherwise where default in payments has affected the housing sector.
A national study conducted by the Federal Reserve Bank, where questions were put forward to borrowers who at any point of time in the past two years had been connected to the process of buying or refinancing a house firmly assert that the loan mortgage documents, no matter in which language they had been drawn, the mortgage broker had worked with maximum borrower interest in mind. Although a few understood, majority of the participants failed to relate between how lender payments to brokers offered a financial incentive to brokers to goad borrowers into accepting loans at higher rates of interest. It was therefore a difficult task for borrowers involved in house foreclosure issue to believe that their harrowing position was to some extent due to their faith in the brokers
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A report on the Consumer Testing of Mortgage Broker Disclosures provides an insight into the basic problem that borrowers are generally unaware of the terms and conditions of the agreements they sign upon and rely on their own perceptions of things. These perceptions are aired by the mortgage brokers themselves. At present it is sincerely felt, for the wider interest of the public and the nation as a whole that the existence of the mortgage brokers in the house mortgage market is totally undesirable and a regulatory change is absolutely essential to stabilize the rattling foreclosure market.
