What is an UpFront Mortgage Broker™?

The UpFront Mortgage Broker® (UMB®) concept was conceived by Jack Guttentag, the nationally syndicated columnist and well-known expert on mortgage loans. Professor Guttentag developed the idea as a result of his experience as a mortgage advisor to consumers.  You can visit the professors site for more information

To be an UMB®, the mortgage broker must operate under specific guidelines.  The Upfront Mortgage Broker Commitment® describes these guidelines.

I am one of the original founding members of the UpFront Mortgage Brokers organization. You can verify and view my profile on the UMB web site.

How does a UMB® differ vs. a typical Mortgage Broker?

There are major differences between a UMB® and a conventional mortgage broker:

UMBs® disclose their fees to customers in advance and in writing, and disclose the wholesale prices (rates and points) passed through from lenders. Customers of UMBs® pay the broker's fee plus wholesale loan prices.  In contrast, conventional mortgage brokers add a markup to the wholesale prices, and quote the resulting “retail prices” to customers.  Most standard lenders reveal their markup only in required disclosures after an application has been submitted.
 
The UMB's Interests are fully aligned with their customers. They can  thus represent borrowers in shopping for loans.  In contrast, brokers shopping the market are often in a conflict situation with customers.  For example:

• The loan type that best meets the customer's needs may not be the one that allows the largest markup for the broker

• Brokers may profit by ignoring customer requests to lock the rate/points, putting the customer at risk.

• Brokers often increase their markup on customers who allow the rate/points to float by not giving them the best available rate (the float rate) when the loan is finally locked.

UMBs® credit customers with any rebates they receive from third parties. Mortgage brokers sometimes receive rebates from lenders or concessions from home sellers.  UMBs® credit customers for any such payments that would otherwise increase the broker’s fee beyond what was agreed upon.  In contrast, brokers may or may not credit customers for payments from third parties, depending on the circumstances. 

Why should a consumer choose a UMB®?

Easy, transparency. For most people, a home is the biggest investment they will ever make. However, few people do the research necessary to make a good buying decision. The home-purchase o refinance process is extremely confusing for most people. With a little bit of homework, and some advice from dedicated true professionals, you can make this a little easier on yourself. There is no substitute for taking the time to educate yourself before you buy or refinance a house, which typically costs you 25% to 40% of your gross income!

The basic nature of the mortgage process allows non-UMBs the opportunity to “mark up” the interest rate and/or increase the fees. The net result is many consumers end up paying more than they should for a mortgage loan. One of the reasons that conventional mortgage brokers conceal their fee as long as possible is a concern that consumers don't fully appreciate the value the brokers provide.  Because consumers dealing with UMBs® agree on a fee in advance, it is important that consumers also understand exactly what they are getting for their money, and what it might be worth.

When dealing with an UMB®, you are assured of fair treatment because of pricing transparency, you get access to wholesale interest rates posted by lenders, you get the benefit of the broker’s expertise and contacts in shopping multiple lenders for the best deal.

Finding the right home starts with a great search tool

Saint Paul / Minneapolis (Twin Cities) MLS Only

Commitment of an Upfront Mortgage Broker

1. The broker will be the customer's representative or agent, and will endeavor to act in the best interest of the customer.

2. The broker will establish a price for services upfront, in writing, based on information provided by the customer.

3. The price may be a fixed dollar amount, a percentage of the loan, an hourly charge for the broker's time, or a combination of these.

4. The price or prices will cover all the services provided by the broker.  This includes loan processing, for which customers always pay a broker or lender.

5. 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.

6. 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.

7. If the broker's fee is 1 point, for example, and the broker collects 1 point from the lender as a "yield spread premium", the broker either charges the customer 1 point and credits the customer with the yield spread premium, or charges the customer nothing and retains the yield spread premium.

8. 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 for that loan.

9. The wholesale prices from which the broker's selection is made will be disclosed at the customer's request.

10. 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 fee charged by the lender who locks the rate.

11. 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

12. 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.  If the web site displays mortgage prices, the broker will indicate whether the prices are retail or wholesale.  If prices are retail, the markup will be shown.  If prices are wholesale, a prominent note will indicate that the broker's fee will be an added charge.

13. A broker who displays mortgage prices on its web site must indicate whether the prices are retail or wholesale.  If they are retail, the markup must be shown.  If they are wholesale, the broker must indicate that the prices do not include the broker's fee.