At the closing table, the real lender provides the funds needed for the broker to close the loan in the broker's name. The sale price is based on the rebate. In the case of the 8 percent loan with the 1.7 rebate, for example, the broker would sell the loan for a price of 98.30 percent of the loan amount. In this way, the rebate is concealed forever. Many mortgage brokers table-fund for no reason other than to avoid having to disclose rebates to borrowers.
Brokers usually make more money on transactions involving rebates.
This may be because borrowers don't know how much brokers make from rebates. Also, borrowers who minimize their cash outlays may be less careful about the rate they agree to pay, which permits brokers to capture large rebates. Jack Guttentag is professor of finance emeritus at the Wharton School of the University of Pennsylvania.