MBA Releases Policy Paper Clarifying Roles of Mortgage Bankers and Brokers

The Mortgage Bankers Association (MBA) today released a new policy paper titled, 'Mortgage Bankers and Mortgage Brokers: Distinct Businesses Warranting Distinct Regulation.' The paper brings clarity about the roles and responsibilities of mortgage bankers and mortgage brokers to current legislative and regulatory discussions.

'Mortgage bankers and brokers are both central players in the effort to provide the opportunity of homeownership to millions of Americans,' said David G. Kittle, CMB, MBA's Chairman-elect. 'Bankers and brokers, however, serve different functions in the mortgage process that demand different regulatory oversight.'

The recent turmoil in the mortgage and housing markets has brought renewed attention to the mortgage origination process. Several pieces of legislation and regulation under consideration in Congress and the states propose improving consumer protection. According to the paper, efforts to reform the origination process ought to take the distinct differences between mortgage brokers and bankers into account.

'Lenders and brokers have worked together to expand access to mortgage credit, especially for those who may have been traditionally had a difficult time getting home financing,' continued Kittle. 'As Congress and state and federal regulators look at reforming how mortgages are originated, we want to make sure they understand how bankers and brokers differ and how new regulations ought to reflect those differences.'

MBA's paper examines the different relationship and expectations that borrowers have with bankers and brokers and the disparate compensation structures and incentives that each have. It also looks at the separate types and levels of oversight that each faces.

Because improvements to the mortgage origination process can best be achieved through proposals that recognize these differences, MBA is recommending that:

Borrowers receive clear disclosures of the brokers' responsibilities and compensation;
Mortgage brokers who claim to be or act as borrower agents be treated legally as agents;
Mortgage brokers have sufficient financial resources - through a national minimum net worth requirement - to provide protection to borrowers and mortgage bankers where necessary;
Mortgage brokers be appropriately bonded to give consumers greater protection; and
All loan originators, including brokers and bankers, be registered and appropriately licensed in accordance with rigorous standards.

A copy of Mortgage Bankers and Mortgage Brokers: Distinct Businesses Warranting Distinct Regulation can be found at www.mortgagebankers.org.