Study Finds Mortgage Brokers Charge Higher Fees

Wall Street Journal (05/30/08) P. A11; Hagerty, James R.
A study by former HUD chief economist Susan Woodward found that mortgage borrowers in neighborhoods with higher education levels were charged lower fees than others and that those borrowers obtaining loans through loan brokers paid higher fees than those working with the lender directly. The study examined 7,560 fixed-rate purchase mortgages insured by the FHA and written from May to June 2001, indicating average broker and lender fees of $3,400 on loans with a principal averaging $105,000. Average fees for direct lender loans were $3,150, while borrowers were charged $4,000 on average for brokered loans. Despite claims that yield-spread premiums paid to brokers allow borrowers to pay a little more in interest in exchange for reducing their upfront fees, the study showed that borrowers lowered upfront fees by an average of just $7 for every additional $100 paid in interest. The lowest fees were paid by borrowers obtaining "no-cost" mortgages, according to the study. National Association of Mortgage Brokers Executive Vice President Roy DeLoach, noting that no other research reveals cost-savings tied to brokered loans, criticized Woodward's study for using data from seven years ago.