Let me clearly state that I’m not a proponent of this Bill at all, for a number of reasons, most specifically:
No amount of legislation from the folks in Ivory Towers is going to ‘fix the mortgage problem’.
Mortgage law MUST transcend and apply to both brokers and bankers, otherwise it’s a total f*****g joke.
While 3915 can be construed as an attempted land grab by Big Business (BB), an election year political spin topic, and a number of other scenarios that involve ‘The Man’ holding the little guy down…the glaring omission from these conspiracy theories is that of general ignorance by the status-quo within the mortgage broker industry when it comes to their own industries law.
Why am I still shocked at the ignorant short sighted opinions of the many mortgage professionals who are putting their views out there? I’m inclined to make examples out of specific people, not to bash them for my gain, but to help them understand that they’re part of the problem, part of the reason a Bill such as 3915 gets as far as it has.
For example, I’ve been in more than one heated debate about Yield Spread Premiums (YSP’s) over the past few years. In no argument have I ever lobbied for their elimination, rather for their proper disclosure, because if they are not DISCLOSED PROPERLY they are a kickback and illegal under the Real Estate Settlement and Procedures Act. You’d a thought I shot someones mother when I made the above linked post on Active Rain.
Clarification regarding the use of YSP from HR 3915, (Italicized text is directly from the original document):
- It doesn’t propose to ‘ban’ Yield Spread Premiums:
No mortgage originator may receive from any person, and no person may pay to any mortgage originator, directly or indirectly, any incentive compensation (including yield spread premium) that is based on, or varies with, the terms of any residential mortgage loan.
This has been the law for like, ummm, 30 f******g years…?
Here read Section 3500.14 of Regulation X. Better yet, let me pull out a specific clip:
No referral fees. No person shall give and no person shall accept any fee, kickback or other thing of value pursuant to any agreement or understanding, oral or otherwise, that business incident to or part of a settlement service involving a federally related mortgage loan shall be referred to any person. Any referral of a settlement service is not a compensable service, except as set forth in Sec. 3500.14(g)(1). A business entity (whether or not in an affiliate relationship) may not pay any other business entity or the employees of any other business entity for the referral of settlement service business.
Someone didn’t just make this s*** up last week, it’s been the law for a long time people. If you’re a mortgage professional and still think it’s kosher to state something along the lines of ‘YSP is something a lender pays me for…’, you’re an idiot.
I also hear many mortgage professionals saying the passage of this Bill would crush the mortgage broker, the little guy. For the most part, yes, it would. When are those same people going to wake up and realize that times are a changing have changed, get off their ass, stop playing armchair mortgage jockey, get some actual business sense and evolve??? Grab a whole of your industry before someone, through a Bill proposal like 3915, does it for you.
If anything positive comes out of HR 3915, it should be an industry’s head out of its collective ass.
No one likes to hear I told you so but…Also See:
Three Questions to ask Any Mortgage Professional
Mortgage Interest Rate Pricing The Disturbing Truth
The Mortgage Brokers New Clothes
The Mortgage Industry’s Internal Civil War
The Need For Transparent Mortgage Rate Search
Good post... Although I disagree that some sort of regulation will not assist in straightening this mess out, I agree with you that this particular set of regs does not and will not accomplish the stated goal.
Much of the trouble today is not from unethical practices, unless we all believe that mortgage loan originators are really out to get their clients (some may be, but by no means is it a majority) but instead the issue is, in my view, the over priced housing market, now in regress back to the norm, and the highly leveraged position of the average American homeowner. For example, I have seen mortgages made to folks living in $400K houses, who owned the house for a number of years, and who purchased it for less than half of that price.
The same owners had some how managed to accrue some $180K in credit card debt, and wanted to pay it off with a cash out refi. They took an ARM, assuming that the state of the market would continue. The ARM has now started to float. They cannot afford it.
Was it the mortgage loan originator who caused this issue? No... what they did was service a client, and provide what the client needed. They did say that the rate would adjust after a time, and that it woudl cap at X. They did not forecast what the economy would be doing in the next 2 or 3 years, since at the time the loan originators crystal ball was malfunctioning.
All of our crystal balls are malfunctioning... mortgage rates are no longer coupled or parralleling the Fed rates as they once did. So says Alan Greenspan. This causes some scatter in rates... Also, the housing market was berserk... acceleration of prices was at unheard of levels. SO... Who is to blame?
@ Paul...Solid points...I appreciate the thoughtful comment.
@ BB...Good to 'see' you too my friend...You know I'm always sitting on the fence about these things ;)
What's the AR black list? Was I really on 'it'?
I was in Seattle last week and had a nice dinner with Jon, which he paid for...maybe thats why..? lol
X ... Y ... Here ...
Oh. Boy. You're symboling the f word. And you wonder about that black list. LOL.
Good to see you :)
P.S. Hope you're taking good care of my steal boys :)
TLW...ROAR!
hey hey Y!
I almost didn't symbolize it...and I think I cussed a time or two elseware...don't know about the black list, but it sure as h** won't get this post featured ;)
Your boys are in good hand :))
take care...
Great post ... I think that the only way this industry Mortgage and Real estate alike will survive into the future is a fee based charge just like other professionals ... when the would commission is used the words SCUMMY SALES PERSON jumps in front of many people.
I look forward to seeing the results ... again GREAT POST
Jeff, you didn't miss too many words. I got the point and it would seem that others should too. Glad to see you over here. Now, I don't have to tickle you, to get your attention...
It would be great if everyone that considers themselves to be a professional would just do it honestly...solves a lot of problems.
Hi Jeff...I've been here twice and don't want to comment until I research this further. (I was actually reading the bill :)
(I wonder if I take my profile pic like that if I'll look mysterious too :)
How can you expect someone that "services" mortgages to be in the same category as someone who closes a mortgage and then sells it off that same day or not put the mortgage in their name at all? Many companies service loans and then bundle them up and sell them in bulk to Wall Street in large numbers (most in multi-million dollar packages). How can you say that large companies that service their loans for a year or two and then sell some of their mortgages off in multi-million dollar lots are in the same category as a broker that never puts the loan in their name at all? How can you say that they are the same as those who sell them off at the closing table? How can you tell a client at closing what the YSP will be if the mortgage company keeps the loan for 1 month; 6 months; 1 year or even 5 years? How do you show what the YSP will be especially at the closing table? Most large mortgage companies have no idea how long they will keep their mortgages. Maybe you can put a time equation into it; I doubt that. It will be VERY hard to come up with an equation for an unknown. Yet most Banks restrict their agents from getting overage (the last 2 banks I worked for did). Most mortgage Brokers do not restrict their agents from getting YSP. Most of the Brokers don't know what the answer is. But I do know I can't make any overage unless it is paid back to the customer for his/her closing costs. When I worked for several brokers and mortgage companies, they almost forced me into getting YSP. Times are a changing but I can't see how you can stop a Servicing Mortgage Company from getting YSP. Maybe I'm just not up to date on my facts. Oh well, after 16 years, maybe I'm not as smart as I thought I was.
Dick Piehl
Senior Mortgage Banker/ Reverse Mortgage & VA Specialist (I am a vet)
952-885-565
800-444-5007 Ext 5653
Dick
Dick
How can you expect someone that "services" mortgages to be in the same category as someone who closes a mortgage and then sells it off that same day or not put the mortgage in their name at all? Many companies service loans and then bundle them up and sell them in bulk to Wall Street in large numbers (most in multi-million dollar packages). How can you say that large companies that service their loans for a year or two and then sell some of their mortgages off in multi-million dollar lots are in the same category as a broker that never puts the loan in their name at all? How can you say that they are the same as those who sell them off at the closing table? How can you tell a client at closing what the YSP will be if the mortgage company keeps the loan for 1 month; 6 months; 1 year or even 5 years? How do you show what the YSP will be especially at the closing table? Most large mortgage companies have no idea how long they will keep their mortgages. Maybe you can put a time equation into it; I doubt that. It will be VERY hard to come up with an equation for an unknown. Yet most Banks restrict their agents from getting overage (the last 2 banks I worked for did). Most mortgage Brokers do not restrict their agents from getting YSP. Most of the Brokers don't know what the answer is. But I do know I can't make any overage unless it is paid back to the customer for his/her closing costs. When I worked for several brokers and mortgage companies, they almost forced me into getting YSP. Times are a changing but I can't see how you can stop a Servicing Mortgage Company from getting YSP. Maybe I'm just not up to date on my facts. Oh well, after 16 years, maybe I'm not as smart as I thought I was.
Dick Piehl
Senior Mortgage Banker/ Reverse Mortgage & VA Specialist (I am a vet)
952-885-565
800-444-5007 Ext 5653
Dick
Dick
Why am I still shocked at the ignorant short sighted opinions of the many mortgage professionals who are putting their views out there?
I ask the same question, Jeff. Almost every lending professional I know is still in denial. "All we did was give the customer what he wanted." It's classic hand-wringing. It's this incredulous denial, even now, that leads to 3915 and, probably, even worse measures in '08 and '09.
Good post, good points.
@ Dick...
My post centered around particular disclosures issues and related steering, I dont quite follow how your statements/questions pertain to this post, so i'll try to address them 1 by 1. I believe you have YSP and SRP confused, or use the acronyms interchangeably, which is misdirected...
You seem to read in my post somewhere that I say that a brokers responsibilities are the same as a bankers, correspondent lender, wholesale lender, Bank et. al, which I do not:
Sorry Dick, I understand your statements, just not how they pertain to this post....
@ Randall, Thanks for the detailed, well thought and profound explanation...? Tell Bob your attorney buddy to stop by.
@ Kelle..Well stated and I agree fully.
@ Celeste...I wish everyone would do their homework like you :) As far as the pic, I was sitting in Laguna Beach, my friend called my name and shot it...It was no pose...lol
Gotta go...Thx to all for taking the time to comment.
You're funny :) I had to sleep on this and come back with a clear head :) Though I am a Realtor® you'd think I'd be more educated on what's going in in your industry as well.....bottom line the bill looks
that it may just be causing more trouble than what it's worth.like I would agree with the mortgage industry needing to just have high standards although other parts look like it may hurt the buyer? It would definitely make for smoother "team work" action going on with stricter rules. In Hawaii we do not even mess with online or out of state lenders due to the fact that we have NO recourse if something goes wrong.I like working with Mortgage brokers...especially ones I trust and know will get the job done....as well as being able to "shop around" and get better deals.......if everyone took pride in their work and didn't just sell a loan to sell a loan....well we just may be in a better position now....and a bill such as this was inevitable for everything that went on the past few years. So who's to blame? who cares at this point......do a better job....and move on.
Who knows if I was on track with this :) Thanks for a "make me think" and want to research post. :) At least I know a little more than I did yesterday :)
P.S. I came back to read and thought...omg....I need more coffee ha!
I'd argue the niggardly points but the general message is on target.
This bill affects me none. If licensing is to happen, I hope they tighten the standards so that the 30% of us who really know what we're doing survive. I'm actually thinking about supporting this bill if they legislate 70% of my competition away.
This is getting interesting...
Q for Brian...What do you see as the, ummm, ignorant points? Do tell...
Jeff, great post and I think alot of people that read this got it. YSP in of itself is not evil it is the disclosure or should I say nondisclosure that is inhibiting. Bofa and their no closing cost loan is a prime example of non disclosure. I just closed my second convert from this loan saved them a point on interest, gave them the opportunity of choosing the rate at par or they buy it down. They both saved 1.125% on rate and they paid closing costs on the front and saved $150-$160 in monthly payments. Speaks for itself.
As for Dick Piehl apparently my friend after 16 years in the business you just don't get it. Limit yourself, and you limit the universe.