(This is Part 1 of a two-part series. Read Part 2, "Seattle mortgage broker adopts U.K. model.") To gain perspective on institutional practices, nothing beats seeing how the practices differ somewhere else. Recently I looked at how mortgage brokers and the lenders they deal with operate in the United Kingdom. I have had invaluable help from Richard Hobson, a broker in the U.K. for many years who is now a broker in the United States. The basic economics of the industry are essentially the same on both sides of the Atlantic. Assuming that the lender is satisfied that the broker is properly licensed or certified, the arrangement between them is very simple. In effect, the lender says to the broker: "Here are my prices and eligibility requirements; you bring me an eligible customer and I'll make the loan." Lenders find it advantageous to work through brokers because it gives them nationwide distribution capacity without branches or loan officer employees. E...
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