What is Mortgage Net Jumping?

The consumer finance magazines and blogs are rife with harrowing tales of lender and broker tricks played upon hapless borrowers. But believe it or not, borrowers are guilty of a few nefarious tricks themselves. One such frustration borrower trick (what some may even call a borrower scam) is called “net jumping.” Net jumping is a practice wherein a borrower approaches a mortgage broker in order to help them find a mortgage loan that fits their credit score, budget and financial situation. But in order to avoid the mortgage broker’s fees, the borrower will break ties with the mortgage broker at the last minute and get a home mortgage on the Internet, using the information that the broker collected for them to their advantage.

How Does Mortgage Net Jumping Work?

Mortgage brokers, like real estate agents, are compensated by fees which are levied when a mortgage is closed. They get their fees from the mortgage lenders themselves, which means that their services usually are provided at no cost to the borrower. Furthermore, the mortgage broker does not get paid for his or her time at all if the borrower does not close a mortgage loan through them.

The service that mortgage brokers offer vary depending on the circumstances, but in most cases, mortgage brokers will take a look at your home-buying goals and assess your financial situation and credit score to find a home mortgage loan that will be most affordable for you. In many cases, mortgage brokers will help you improve your credit score in order to qualify for an advantageous home mortgage loan. In any case, a mortgage broker can give you a list of interest rates that they can offer you based on your credit and income profile.

Net jumping is when the borrower takes the services and information that they’ve been offered and close the loan without them instead. It’s almost as if you had asked a real estate agent to help you find a home, put together an offer and negotiate a sale agreement with a seller, only to cut them out and buy the home directly in the end. Net jumping mortgage brokers is by no means illegal - but it is unethical.

Does Mortgage Net Jumping Save You Money?

In some cases, it might. But it’s important to remember that mortgage brokers often get quoted lower interest rates from individual mortgage lenders than you might. Let’s say a mortgage broker tells you that he has a 5.875 percent 30-year fixed mortgage lined up for you from Bank ABC. You could close on the loan through him, or you could attempt to net jump the mortgage broker by contacting Bank ABC on your own. You may be surprised to learn that the very same loan that was offered through the mortgage broker actually winds up being a 6.00 percent mortgage when you applied directly. That’s because mortgage brokers often get discounts from banks that they work with on a regular basis, much like a wholesaler gives discounts to your local supermarket. In this case, cutting out the middleman doesn’t always save you money.

What Are the Negative Impacts of Net Jumping?

Like all consumer practices that hurt the bottom line, mortgage brokers who are harmed by net jumping may be forced to take measures to protect themselves against those who abuse their services in ways that impact all borrowers. This likely comes in the form of a non-refundable upfront fee for their services that is charged to all borrowers. While few mortgage brokers today would venture to charge an upfront fee, if the practice of net jumping continues, it may become an industry standard. Just as the free checking account at the bank and free checked bags on airlines have gone the way of the dodo, so too may the fee-free mortgage broker.

So, consider this a PSA: instead of trying to outsmart a mortgage broker who you believe is trying to hoodwink you, find a mortgage broker who is honest to begin with. That way, you won’t have to one up each other.