The big banks don’t trust mortgage brokers any more. Should you?

Jen A. Miller picture

If you’re in the market for a home loan, here’s something you should know.

None of the four largest commercial banks are still making loans through mortgage brokers.

Wells Fargo, the nation’s largest home loan lender, was the last big bank to drop brokers last month.

Citibank, JPMorgan Chase and Bank of America had already stopped doing business through the independent loan offices.

Wells joined them after reaching a $175-million settlement with the U.S. Justice Department over its failure to properly police the brokers who peddled its home loans from 2004 through 2009.

The government says those brokers charged more than 30,000 minority borrowers higher fees or interest rates on their loans than white borrowers with similar credit histories.

An additional 4,000 were steered toward subprime loans by brokers, even though they had the same credit risk as white borrowers who received prime loans.

The complaint against Wells Fargo cited data that showed Chicago-area customers who borrowed $300,000 through an independent broker in 2007 were charged an average $2,937 more in lender fees if they were African American and $2,187 more if they were Hispanic.

What does this mean for you?

If you're currently applying for a Wells Fargo mortgage through a broker, the application will move forward as long as you began the process prior to July 13.

But if you’re about to start the application process, you need be fully aware that your broker won’t be able to quote rates from any of those big banks.

Of course, they can still offer you loans through other lenders they represent.

But being shut out by those four major banks will make it harder for them to offer you the best deal -- and for you to have the same peace of mind that you’re paying the lowest possible rate and fees.

So once you’ve heard what your broker has to offer, it’s important for you to do some online comparison shopping.

A good place to start is Interest.com’s mortgage rate database. With just a few key strokes, you can quickly see what dozens of other lenders are charging in your area.

The big banks no longer working with brokers are often included in those results.

Now, I think good brokers can still be a big help finding the best loan because that's their job.

They charge a fee that's added to the closing costs (about $300 to $400), but if they get you a solid loan with a lower interest rate, you'll save in the end.

I used one both for my initial mortgage and when I refinanced. But that loan was written by Wells Fargo.

I stress the word "good" because there are plenty of bad brokers out there.

They're regulated on a state level, and as we know, not all regulations are equal.

With no one minding the store, brokers often took advantage of people, as they did in this case, and as they did for Countrywide Financial. (Bank of America, which bought Countrywide, settled a similar discrimination claim for $335 million last year.)

I don't think brokers will ever go away. Some consumers, like me, prefer to pay the fee to work with them versus a DIY approach to finding a loan.

Their industry may just need a few years to get back in the big banks' good graces -- and ours.