This is an excerpt from an article in the December 2009 issue of RealtyTrac. Read all of it here.
UMBA
The Upfront Mortgage Brokers Association (UMBA) has just 80 individual members and 10 company members. Based on the ideas of Jack Guttentag, aka “The Mortgage Professor,” a nationally syndicated real estate columnist and a Professor of Finance Emeritus at Wharton, the group has a code of ethics that actually means something.
For instance, members pledge that “the broker will endeavor to act in the best interests of the customer.” Nothing fuzzy about this, it creates a fiduciary obligation to represent borrowers. Members also promise to “establish a price for services upfront, in writing, based on information provided by the customer.”
“The price,” says the UMBA code, “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
the 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.”
Lastly, with UMBA members hidden yield-spread premiums are out. Not only are such premiums disclosed, they're credited to borrowers.
“If the broker's fee is 1 point, for example,” says UMBA, “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.”
You can see the benefit of the UMBA approach. If it makes sense to have a buyer broker representing you as a real estate purchaser, why would it not make sense to have a mortgage broker protect your interests when you get a loan?
UMBA is small and not well known, but the way things are going it's the future of mortgage brokerage. Members pledged to its standards are listed on its website, UpfrontMortgageBrokers.org
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Peter G. Miller is syndicated in more than 100 newspapers and operates the consumer real estate site, OurBroker.com.
