upFront Mortgage Broker Terms of Commitment
Commitment of Upfront Mortgage Broker®
UMBA members operate under the following formal commitment. To learn about UMBA principles [link to subsection] and to contact Jeff Chin, UBMA member, please click here [contact page].
1.
The broker will endeavor to act in the best interests of the customer.
2.
The broker will establish a price for services upfront, in writing, based on information provided by the customer. The price may be a fixed dollar amount, a percent of the loan, an hourly charge for the broker’s time, or a combination of these.
The price or prices will cover all services provided by the broker. If the broker charges a loan processing fee, the amount will be disclosed to the customer, regardless of whether it is paid directly to the broker or to a third party.
On third party services, such as an appraisal, ordered by the broker but paid for by the customer, the broker will provide the invoice from the third party service provider at the customer’s request. Alternatively, the broker may have the payment made directly by the customer to the third party service provider.
3.
Any payments the broker receives from third parties involved in the transaction will be credited to the customer, unless such payments are included in the broker’s fee. If the broker’s fee is one point, for example, and the broker collects one point from the lender as a “yield spread premium,” the broker either charges the customer one point and credits the customer with the yield spread premium, or charges the customer nothing and retains the yield spread premium.
4.
The broker will use his best efforts to determine the loan type, features, and lender services that best meet the customer’s needs, and to find the best wholesale price (rate and points) for that loan from the lenders with which the broker is approved.
5.
After the terms have been locked, if requested by the customer, the broker will provide a copy of the applicable lender’s rate sheet that discloses the wholesale price.
6.
When directed by a customer who has met lender lock requirements, the broker will lock the terms (rate, points, and other major features) of the loan, and will provide a copy of the written confirmation of the rate lock as soon as it has been received from the lender. At the same time, the broker will guarantee all fees charged by the lender who locks the rate.
7.
If a customer elects to float the rate/points, the broker will provide the customer the best wholesale float price available to that customer on the day the loan is finally locked.
8.
The broker will maintain a web site on which its commitment to its customers is prominently displayed, along with any other information the broker wishes to convey.
Subsection:
Upfront Mortgage Broker® Principles
Borrowers seeking a trusted mortgage professional who is guaranteed to operate only in a fair and transparent manner when dealing with borrowers can turn to a member of Upfront Mortgage Brokers Association (UMBA).
Upfront Mortgage Brokers Association is a group of professionals who set an industry example of fair and transparent practices by following a strict process which eliminates, in a way which is firm and verifiable by the borrower, any potential for employing unfair business tactics. Additional information about UMBA can be found on UMBA website www.upfrontmortgagebrokers.org. Helpful educational resources can also be found on www.mtgprofessor.com. A short to-the-point description follows below.
How Mortgage Brokers Operate in General
Similar to insurance agencies which sell policies from multiple carriers, and to car dealerships which sell cars made by various manufacturers, mortgage brokers operate through wholesale channels of lenders which are part of their business network. Because of their overall efficiency, competitiveness, and stronger customer orientation, mortgage brokers currently originate about 60% of all residential loans in the United States. Brokers perform an array of costly origination and processing services for which they receive a fee. This fee can be received from the borrower, in which case a broker would be able to offer a lower rate, or from the lender, in which case the broker would offer a rate for which the lender pays a rebate, called Yield Spread Premium, to the broker. Because lenders pay higher Yield Spread Premiums for higher rates, there is a felt incentive for traditionally operating brokers (but only those with failed ethics!) to ultimately settle the borrower into higher rates. Direct lenders and retail banks have incentives to sell higher rates to individual consumers as well, but that is part of another discussion.
How Upfront Mortgage Brokers Operate
Upfront Mortgage Brokers set their fee upfront as they evaluate the nature and complexity of the transaction. Since the fee is established upfront, the broker has no incentive to sell higher rates, because any amount received in excess of the agreed upon fee must be passed back to the borrower and can not be retained by the broker. The Upfront Mortgage Broker® guarantees the fee in writing. Additionally, the borrower will receive lender’s rate lock confirmation showing the Yield Spread Premium, and, upon request, the lender’s wholesale rate sheet which further confirms the amount the lender will pay to the broker for the chosen product and rate. In cases where the borrower wishes to pay the broker’s fee directly in exchange for a lower rate, the broker would offer a rate for which the lender would pay zero in Yield Spread Premium.
The signed UMB Agreement, the rate lock confirmation, the wholesale rate sheet, and the closing documents showing the final Yield Spread Premium are the means which make the fair treatment and transparency firm and verifiable by the borrower. Only professionals who want to earn their fee in the most direct and honest manner while performing valuable services for their clients would agree to such standards. These professionals are members of Upfront Mortgage Brokers Association.
Review Upfront Mortgage Broker® Commitment.
UMBA-based Rate/Cost Estimates
Upon request, Superior Funding Corporation provides several rate/cost combinations in one easy to read estimate. The detailed cost breakdowns include all lender fees, all third party fees, the broker fee for service and the Yield Spread Premium. The estimate typically includes the following options: Reduced Rate Option, where part or all of the broker fee for service is paid directly by the borrower, Standard Rate Option, where the broker fee for service is paid by the lender through the Yield Spread Premium, and Reduced Cost Option, where the Yield Spread Premium covers broker fee for service as well as some of the other costs.
