People are confusing what a mortgage broker does with what a bank or S&L historically used to do. A mortgage broker is a middleman who feeds your paperwork over to Fannie Mae or Freddie Mac as soon as you sign on the dotted line. They make a commission on the deal and never see you again. Back in the dark ages, banks and S&Ls used to use the savings from depositors to fund their mortgage business. Years ago, they stopped doing this and got into the mortgage broker business. Somehow, John Q Public never caught on to the fact that the bank immediately sold their mortgage. As long as Fannie May and Freddie Mac will take the paper, a mortgage broker will write you a mortgage. When the Federal Government screwed with mortgage lending criteria, it became much easier to write a mortgage for someone who was highly unlikely to be able to make the payments. As long as the mortgage broker isn't lying, they're just executing federal government lending policy. There is nothing unethical about it.