There seems to be a growing trend among certain lenders to focus their business on higher volume brokers. If a broker doesn’t send a lender enough deals, for example, that broker may get poorer rates, worse service, or no service at all (i.e. the lender doesn’t accept their business).
Lenders feel they have legitimate reasons for these policies, and in some cases they might. Nevertheless, it goes without question that it creates the potential for ethical dilemmas.
If brokers are motivated to send their volume to fewer and fewer lenders to achieve “status,” the odds increase that clients will be put into products that aren’t in their best interests.
Suppose a broker needs one more deal to hit their status for the month with lender A. Lender A offers a suitable product for the broker’s client at a 5.50% interest rate.
All other things being equal, suppose lender B offers a similar product at 5.30%, but gives no status.
Should there even be a question where that broker sends the deal? Probably not.
When choosing the best product, our fiduciary duty as mortgage planners should be to the client. For this reason, the trend above is worrisome.
Keep in mind, this is an admittedly cursory view, and is only one opinion. There are literally thousands of right-minded mortgage planners for whom this would never even be question.
If you’re a broker or lender, we’d love to hear your comments.
If you’re a borrower, don’t be afraid to ask your mortgage broker their policy on the above.
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