The XBroker: April 2009

Here We Go Again, DC Empowering the Big Banks (YSP Wars)

The same banks that recently used Mortgage Brokers as agents to sell their products are now trying to set an unfair playing field that will ultimately eliminate brokers from the lanscape. 

If passed, H.R. 1728 would turn out to be an Epic FAIL that harmed the consumer and broker while lining the banks P&L...but thats just 'good business' I guess.

Say it isn't so! H.R. 1728 (did not get passed in the Senate the last time)

Let me explain this to you One More Time Brad Miller and Mel Watt. Side question: How does such an obviously beneficial to big banks and destructive to mortgage brokers legislation get introduced by Congressmen from a notrorious big banking area?

What Yield Spread Premium is NOT

Yield Spread Premium is not a unique and only way for loan officers to rip off home owners and home buyers (any more than any other way).
Yield Spread Premium is not something a mortgage broker can make up on their own.
Yield Spread Premium is not a secret - in fact by Federal Law (RESPA) it MUST be disclosed.
Yield Spread Premium is not by any stretch of the imagination "the" rip-off

Now, Brad Miller and Mel Watt, let me tell you how to rip people off:

Charge absolutely no Yield Spread Premium but instead get a lenders license and charge more than a broker would without having to disclose it. Do you even know this boys? Of course you do! How else would big banks be able to lobby you, or worse, and have you come up with such a damaging piece of legislation?

Loan officers of Federally chartered mortgage banks who HAVE NO YIELD SPREAD can rip off the people easier than any mortgage broker. Countrywide, Wells Fargo, Bank of America - none are required to disclose their back end profit and EVERY MORTGAGE BROKER IN AMERICA is required to disclose EVERY PENNY they earn. Not ONE direct lender is. Even small lenders are not required to disclose their earnings and one of the ways they are encouraged to become lenders, in fact one of the very first words out of the mouths of the Big Banks is: once you have a warehouse line and become a correspondent you won't have to disclose YSP anymore AND YOU CAN CHARGE AS MUCH AS YOU WANT BECAUSE YOU DON'T HAVE TO DISCLOSE!

I know this because I am not a broker - I am a LENDER. I do not have to disclose YSP. I could, if I were so inslimed ... er inclined ... "put the screws" to my borrowers. And guess what? You get rid of mortgage brokers and you'll only have lenders and lenders will be free to pillage. Why? No highly regulated competitors.

Some will say, "Ken, your over reacting." Okay, you're right. A few people are conspiring against my industry to make a law that will not keep even one person from being "ripped off" and at the expense of lower closing costs.

Why do I say lower closing costs? You know all those "no cost loans" you see advertised by people like Bank of America? Those are achieved by raising the interest rate in an amount commensurate with covering the closing costs. YES! Bank of America uses exactly the same tactic as ANY MORTGAGE BROKER. The difference? The broker is required by Federal law to call it YSP and disclose every penny of it. Bank of America? Not required to disclose it EVEN THOUGH IT IS THE SAME AMOUNT USED FOR THE SAME PURPOSE.

Okay, make it fair - either all originators disclose all of their revenue or none do. Why only require the mortgage broker to do so and not the banks? Oh, the National Association of Mortgage Brokers doesn't have pockets as big as those other organizations ... that's what I thought.

You know Georgia, and a couple of other states, have Fair Lending Acts which limit the amount of compensation to brokers REGARDLESS of the type of loan so long as it is a RESPA covered loan. Right now the biggest rip-off is revers mortgages. In Georgia a banker can make as much as they want by charging almost any interest rate they want and there is nothing the State can do about it because bankers do not disclose back-end compensation. Which is what makes all of these YSP related allegations and regulations about as moot as a breath in a whirlwind.

You are right - I hope I am over reacting enough to WAKE YOU UP!

Now if you read this far and you know anything about me you know I have long pushed for national licensing of ALL loan officers. This bill does not meet that requirement for, once again, does not require for every loan officer to be licensed. Nope, if you work for one of the big banks you won't need a license.

I had fun with text formatting on this article. Should have gone full HTML!

Comment balloon 5 commentsJeff Corbett • April 29 2009 04:32PM
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