Discount brokers not upfront about real estate loan fees

Charges likely hidden in higher interest rate
Published on Feb 21, 2005

"In my market search I have come across discount brokers who seem to uphold many of the same ethical standards as Upfront Mortgage Brokers (UMBs) but do not charge any fees for their service. They claim they are compensated by the lenders. Isn't that even better?" The term "discount broker" implies that the broker is providing services at a bargain price. Nothing could be further from the truth. If they were practicing full and candid disclosure, here is what they would say to you: "You are paying me in the interest rate, which is higher than it would be otherwise. I prefer to charge you this way because I fear you will resist paying out of pocket and will haggle about the amount. By charging you in the rate, payment is spread out over time in the form of a higher monthly mortgage payment. This will upset you less than a cash payment, especially since you are unlikely even to be aware of how much higher the mortgage payment is. This is really win-win, since I get to charge you more a...