Borrowers with bad credit are particularly vulnerable when applying for a loan, because they represent higher risk for lenders. Sometimes, they're steered into loans that cost them more, and pay mortgage brokers higher fees as a sales incentive.

Consumers with bad credit have a harder time finding sources for loans. As a result, they often are entirely dependent on brokers to get them mortgages. As the mortgage industry suffers through its own credit crisis, loans to those with less than stellar credit become even more difficult for the brokers to find, perpetuating the problem. Bad credit borrowers open themselves up to the possibility of being steered into a loan that costs them more, but is more profitable for the broker.

Struggling bankers

Banks and investment firms are currently faced with a rising sea of red ink, according to recent announcements of earnings-or lost earnings-related to the subprime mortgage crisis. CNN business headlines reported "$20 Billion of Subprime Pain," and several large banks, including JP Morgan Chase, have not yet reported their earnings to add to the tally. The news is not only bad for banks, but also for customers who use them to get mortgages.

Unscrupulous brokers

Many mortgage brokers offer straightforward, honest, and excellent service that helps their clients find the best possible loans for their specific circumstances and needs. But, as with any profession that deals with large amounts of money and desperate customers, there are also the unscrupulous who are more interested in making a profit for themselves than a good deal for the borrower. Some tell their clients that they're getting "the best mortgages possible," but then push them into the most expensive loans available in order to get the highest commissions possible.

The yield spread premium

These special bonuses, which some consumer protection advocates consider legal bribes, are called "yield spread premiums." Mortgage brokers face few regulatory restrictions, and since they originate more than half of all mortgage loans, they're in a great position to exploit uninformed borrowers. Yield spread premiums are especially common with subprime mortgages. Fannie Mae estimates that a huge proportion of troublesome subprime loans were arranged for homeowners who didn't need them because they would have qualified for a prime loan.

If you need a loan but want to avoid padding a mortgage broker's bank account to your own detriment, choose your broker-and your loan-with care and scrutiny. Ask the hard questions, such as "how do you get paid," to find out what kind of fee structure is involved in compensating your broker. Also, ask for side-by-side comparisons to other types of mortgages before selecting one. A good broker deserves fair compensation, because locating your loan can require lots of hard work. But you deserve fair treatment, too. Hire a broker carefully who's not interested in you going broke.