Have you ever wondered what the Building and Loan Bank in "It's a Wonderful Life" would be like in real life?
Steve Habetz Jr., the vice president of Stamford Mortgage -- and a 30-year veteran of the mortgage industry -- explained that's the type of bank he works for.
Steve sent me some feedback on my article, "7 Reasons to Get Your Mortgage From a Broker," and suggested that since the financial crisis, loans made by brokers have been under intense scrutiny -- and that's not how valued customers should be treated.
Without a moment's hesitation, I replied to Steve's email and asked for an interview.
He graciously agreed, and we spent over an hour discussing the benefits of buying a mortgage from a bank. Here are eight of the most important reasons.
1. Loans get approved faster
After shopping your loan around to lenders, it may take brokers a few months to push your loan through. Since banks have the final say on loan approval, it can substantially speed up the process.
According to Steve, he will consistently close loans in a matter of weeks -- and on occasion, even less.
2. Banks make the rules, so only banks can bend them.
QM loans -- or, quality mortgage loans -- are essentially Fannie Mae and Freddie Mac's guidelines for buying mortgages. And in the past few years, these guideline have become extremely rigid.
Steve suggested, "Since we hold a large portion of the loans we make, we have the flexibility to make non-QM loans.
This is the big one, because banks hold assets (loans), the full brunt of bad loans falls on their head. This gives banks the incentive to make good loans, and also the autonomy to make loans that don't fit into Fannie Mae and Freddie Mac's definition of QM loans.
In these cases, Steve suggested, "If I've got someone who really wants to be a homeowner, and has always paid their bills... that's smart lending, it's good for the economy, and it's good for our country."
3. "The vast number of lenders available to brokers has shrunk."
Brokers depend on outside lenders to pick up the loans they make. According to Steve, however, "Since the financial meltdown, broker loans have been viewed by the marketplace as toxic assets."
Steve explained, "There are a lot of good, qualified, honest, and knowledgeable mortgage brokers in the marketplace, unfortunately none of them have the capacity to buy back the loans they make." Steve would go on to say, "As a result, borrowers need to know they will be subject to a far higher level of scrutiny."
4. Brokers have no control over two key aspects of the loan process
Steve suggested that not only is he there for the person getting approved, he's there for the loan in two key phases of the process: approving the loan, and closing the loan.
Steve went on to point out that since his bank holds a majority of the loans they make, he can be there for customers for years after the loan is made.
5. "As a bank employee, I am registered with the NMLS."
In my previous article, I noted that brokers will always have a license -- while that may not always be the case for bankers. This is important because the licensing process -- which varies by state -- includes a background check and continuing education.
To which Steve jested:
Dave... have you ever worked for a bank? Banks don't let you hand out its money without a full background check. And most banks require significantly more hours of continuing education.
While Steve is a banker, he took the brokers continuing education course this past December -- which, in all, took about eight hours. His bank, on the other hand, demands 20 hours of continuing education each year.
6. Turns out banks have one-trick ponies, too
Mortgage brokers do one thing and one thing only, and that's handle mortgage loans -- and for banks, it tends to work the same way.
Steve explained -- while there are some exceptions -- normally there's a team for each type of loan. He noted that it's better to be an expert in one area than to have even small gaps in your knowledge about several different types.
7. Bankers are also paid on commission
Bankers, unlike brokers, have some options as to how they'll be paid. They can be paid on salary, strictly commission, or a combination of the two.
It may be awkward to ask your banker whether they'll earn a commission, but it's an important question. This is because brokers -- regardless of their ability level -- will be paid on commission. Bankers, on the other hand, will only choose to make a commission if they're confident they can get the job done quickly and efficiently.
8. We can all agree, the best loans happen in person
Whether borrowers choose a banker or a broker for their mortgage, Steve agrees the best policy is sitting down and talking over your options.
Buying a mortgage will be one of the biggest decisions you'll make in your lifetime, and it deserves the full attention of someone sitting in front of you -- I'm looking at you, Quicken Loans.