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HR 3915 Addresses Many Aspects of Predatory and Other Mortgage Lending

by Glenn Setzer on
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HR 3915: A FRANK Discussion (11/8/2007)
HR3915 Update (11/7/2007)

Sides are quickly being drawn over a pending bill before the House of Representatives which, if passed, will put in place some stringent new standards for mortgage underwriting and the regulation and compensation of mortgage brokers.

HR 3915 is expected to be voted on by the House Financial Services Committee on Tuesday, November 6. Favoring the bill are consumer groups such as the National Center for Responsible Lending, and in strong opposition are industry supports like the National Association of Mortgage Brokers (NAMB) and the Mortgage Bankers Association.

HR 3915, introduced by Representative Bradley Miller (D-NC) and cosponsored by 21 other members of the House, modifies three major sections of Truth in Lending Act (15 U.S.C. 1602), Title I deals with mortgage origination; Title II outlines minimum standards for mortgages, and Title III addresses high cost mortgages.

Here is a summary of the bill as it was submitted to the House.

Title I requires licensing or registration of mortgage originators. The Department of Housing and Urban Development is charged with creating a registry for originators who are not covered by state regulation or affiliated with depository institutions. The legislation appears to assume that those originators who are so affiliated are now appropriately regulated.

This section establishes a "Duty of Care" for mortgage originators which requires that they "diligently work to present the consumer with a range of residential mortgage loan products" that the consumer can qualify for and which are appropriate to his current circumstances and that the originator make full, complete, and timely disclosure to each such consumer which includes the comparative costs and benefits of each product, and nature of the originator's relationship with the consumer and that the originator discloses if he is or is not working as an agent of that consumer. The originator must also disclose any relevant conflicts of interest.

Originators are prohibited from "steering." The proposed law states that an originator may not receive, directly or indirectly, any incentives (and in the most controversial provision, expressly includes yield spread premiums in that definition) that are based on or vary with the terms of the loan.

Title II, which sets minimum standards for residential mortgages states that no creditor may make a residential mortgage loan unless he first makes a reasonable and good faith determination based on verified and documented information that, at the time the loan is consummated the consumer has a reasonable ability to repay the loan under its terms and to pay all applicable taxes, insurance, and assessments. This provision also extends to cases where a consumer has multiple loans against the same property; the originator is charged with taking into account the total payments on these obligations. These determinations about ability to repay must be based on a consideration of the consumers' current and expected income, credit history, other obligations, employment status, debt-to-income ratio and other financial resources other than any equity in the secured property. (The emphasis is ours.)

Under this ability to repay provision, adjustable rate mortgages which defer repayment of principal and/or interest (with the exception of reverse mortgages) must be evaluated on the basis of the payment needed to amortize the loan by its final maturity.

Title II also requires the originator of a subprime loan to determine that any refinancing will "provide a net tangible benefit to the consumer." Conventional loans are presumed to meet this requirement so long as the interest rate does not exceed the rate on comparable Treasury bills by 3 points (5 for junior liens) while subprime loans are acceptable if they are income verified, underwritten based on the fully-indexed rate plus taxes and insurance, are not negatively amortizing, and the creditors debt-to-income-ratio after the loan is funded will not exceed 50 percent. Loans must have either a fixed rate for the first 7 years or have a margin less than 3 percent over its index. Such a subprime mortgage is generally known as a Qualified Safe Harbor Mortgage.

Title II also prohibits subprime prepayment penalties and limits prepayment penalties on conventional loans to 3 years (or 3 months before reset on an adjustable rate loan). It bans mandatory arbitration on any residential mortgage and prohibits class actions against and provides other protections from liability for assignees of loans.

Title III creates special protections for high-cost mortgages which are defined as having points and fees in excess of 5 percent of the loan amount; OR an APR exceeding comparable treasuries plus 8 points (10 for junior liens); or a prepayment penalty above 2% of amount prepaid or extending longer than 30 months into the term of the loan.

The section also defines points and fees and sets rules for yield-spread premiums, prepayment penalties, single premium credit insurance, and other fees already contained in the existing Home Ownership and Equity Protection Act (HOEPA.) The definitions exclude bona fide discount points for conventional rate mortgages.

Title III also prohibits the following on high-cost loans: balloon payments; recommending or encouraging default; excessive late fees; call provisions; financing any points and fees or prepayment penalties; abusive modification or deferral fees and requires pre-loan counseling for high-cost mortgages.

The entire text of the legislation can be read here.

Opinions pro and con the legislation can be found at websites maintained by The Center for Responsible Lending (CRL), Mortgage Bankers Association (MBA) and National Association of Mortgage Brokers (NAMB).

Please share your opinions of HR 3915.

If you oppose HR3915 you can use the following template, contributed by one of our readers, as a starting point for a letter to your state representative.

SPREAD THE WORD - Forward this story

Contact Your Congressman

SIGN THE PETITION


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Donna
on
Yield Spread Premium is the exact same thing as Service Release Premium (SRP) which is the compensation banks receive for a mortgage. By prohibiting a mortgage broker to receive YSP you will eliminate the whole industry of mortgage brokers, but worse, you will eliminate competition for mortgages and the biggest loser will be the homeowner. If you require the homeowner to pay the fees upfront, a mortgage will become extremely costly to the homeowner.
Jake House
on
this is not what they should be focusing on this is not the issue. The econmy is the issue. All this will do is make a lot more people go out of business increasing the unemploment rate even more. the need to focus on what is what not what brokers and lenders are making.
John Red Burke
on
...and the beat goes on !! The Bankers screwed Borrowers in the 80's and early 90's and the result was their customers (the Borrowers) abandoned them in droves. Who did the Borrowers turn to?? The Brokers!! And who were these Brokers? The Brokers were the ethical and honest former Bank Loan Officers who were fed-up with the Banks dictating what loans & terms Borrowers should have. "You can have a 30yr, 15yr or 1yr ARM, Mr Borrower and would you like 1 or 2 pts with your loan??"

In 1990 the average 30 yr fixed rate loan was 10.13% with 2.1 pts (and another 2+ pts to the Bank upon sale to FreddieMac). In 2006 the average 30 yr fixed rate loan was 6.41% with 0.50 pts (and another 0.25 pts to the Bank upon sale to FreddieMac). Competition from Mortgage Brokers created the high levels of Homeownership we know today. Since the Banks can't win at the origination level they have gone back to trying to legislate Brokers out-of-business.
Lee
on
While the intention is good, this a knee jerk reaction without much forethought. Consumers who are in trouble, hopefully temporary, will not be able to borrow against their homes to provide interim relief. The only result accomplished for those few people, will be default sooner. However, the greater picture, banks will always find a way around as long as Wall Street provides money.
Art
on
It is interesting to read the above comments. It is obvious that the only people who feel that HR-3915 is bad are mortgage brokers. It is time MBs were required to ascend the ladder to professionals, including mandatory: education (100-hrs pre- and 30-hrs continuing-education), testing, penalties for predatory techniques and pressuring appraisers to violate USPAP AND RESPA (fraud), and held to a higher standard than a used car salesman. Responsible MBs are all for this legislation.
J F
on
Requiring the originator of a subprime loan to determine a refinancing will "provide a net tangible benefit to the consumer" is the current gold standard. No reiteration is required.
Michelle
on
Loan originators don't make the rules we just have to follow them, so I agree the finger is being put on us yet again for other's laziness. People think they can just buy a house without being EDUCATED!!! Buy what you know you can afford and be responsible!!!
Matt Freeman
on
As a Broker, I think that some regulation in the industry would not hurt. However, Title III, removes the freedom of choice for a consumer. In some cases, for example, borrower wants to be in the home no more than 24 months a no cost loan would be advisable. To do this the Interest rate is raised and more YSP is paid in order to cover the costs. As I understood Title III would make this more difficult to do. There are ways to limit abuse without limiting consumer choice. More Thought Needed.
Sal Bastawy
on
Consumers are very smart,trying to take that away from them will put them at risk.You can't take all on the brokers yes some of them need lots of work but that is a managing a job not regulations. It is un-American to use one brush over all. Make becoming a broker or a loan officer an education process for who want to be and weed out the few should not be there. Don't make the job undesirable because of the nature of the work but make it worth their while if the want to make an honest living.
HR 3915 Mortgage Reform Resources
on
This bill is bad for consumers! It will decrease competition, increase the cost of financing for American Home Owners, and will limit the tools and options available to home owners!
4NZYKCPA
on
I am a CPA that went into the loan business part-time because my clients kept getting ripped off by loan officers and mortgage brokers. You guys need to clean-up your act or Uncle Sam will do it for you!
J S
on
To prohibit prepay penalities on subprime loans ignores a basic economic reality: to make any loan viable, the interest rate and profit must reflect the inherent risk in the loan. The prepay allows for a lower interest rate by spreading the needed payback over a longer time frame. Take the prepay away and you either have no one willing to make the loans, or you have to raise the interest rate up front potentially back to the predatory high rates of yesteryear. You can't have it both ways.
David
on
The broker can only sell what the lenders and underwriting guidelines allow. The arrows in this bill are aimed at the wrong target. You can't cure cancer with heart surgery.
J Longtin
on
Clearly some folks here are not familiar with the Dutch Tulip syndrome. It is a laissez-faire approach to an industry - or to an economy at large - that leads to recessions and depressions. As a consumer, am I truly best served when a mortgage broker squeaks me into a jumbo subprime ARM with a ridiculous prepayment penalty? No one ever showed me that DTI ratio. I call BS on anyone who says prepayment penalties are "good" for the market.
housing woes
on
ALL loan officers (including banks) to be individually licensed is good for the industry. As for legislation putting strangle holds on lending money and earning money (YSP) with no proof of future results, that's dangerous. Who gets hurt the most from these pre-mature new laws? The borrowers. MN has already experienced the elim. of stated income loans. The self-employed and tip wage earners are hurting, no refi or purchase loans available. Congress may have created another wave of foreclosures..
Bill Parker, CPA*
on
As a CPA who nows makes his living loan originating, I have seen many abuses perpetrated on consumers. So, I and all ethical originators support licensing and registration of ALL originators. Discontinue the unfair practice of requiring brokers to disclose their compensation (YSP) while bankers are excluded from doing so. There are many situations where it is in the consumers best interest to use YSP to cover costs: know not in home very long, shorter break-even time than paying points, etc.)
Ralph Otto
on
Bottom line - the borrowers going into foreclosure should never have received a mortgage. By guidelines tightening, the problem will correct itself. There is no need for additional licensing (another expense to the taxpayers), or YSP restrictions. All fees, charges and terms are disclosed - the money the government is wasting would be better spent on consumer awareness, this way they know to compare.
israel
on
NO on H.R. 3915 http://www.petitiononline.com/HR3915/
Taylor Mills
on
I have been an originator for 9 years. In that nine years, I think I have probably sold 10 Adjustable Rate Mortgages. The problem is not the Yield Spread. The problem is not high cost loans. The problem starts with the Investors offering Junk progams in the first place. The patently self serving conformimg banks who set up sub-prime holding companies to do their dirty work and charge Junk Bond rates to consumers and locking them into them for 3 to 5 years. That is criminal
BadBigBanks
on
This is another way big banks can try to make up for the serious mistakes they've made in other places. This bill is nothing short of a huge payoff for banks. This will, as a fact, put mortgage brokers out of business and provide big banks the monopoly on mortgages. Once this happens, good luck to anyone that is a first time home buyer. This will not only put brokers out of business, but so many other people down the chain will be hit too. Congress cuts 2 million jobs!
GFE
on
Brokers need to stop taking advantage of the borrowers ignorance when it comes to applying for a loan. They trust that they are being placed in the right program. They don't understand GFE's or TIL's or HUD's for that fact. Upfront disclosure of all money to be made by the broker will allow borrower's to shop for a loan fairly. This way they can ensure it is the best deal for them, not the best money making deal for the broker. Keep YSP to be competative, limit broker income!
BurtmanCA
on
It is amazing how often when a house of cards falls how the wrong doers run for cover! I entered the mortgage business after I had been screwed once too many times. I was already a real estate professional. With a straight face the originator lied his butt off. Regardless of YDS etc., the intended purpose is often sidetracked and misrepresented and does not benefit the consumer. Education and accountability is required. The crooks will always find a way regulated, licensed or not.
JG
on
The YSP limit is extremly wrong, when a customer comes to me with a 700+ score can I compete with a bank if I have to charge an up front fee? No. I rely on pricing the loan using YSP for my pay while competeing with the banks beating their rates many times. Many of the banks I compete with sell their loans and make the same profit without disclosing it. Taking away YSP is cutting my throat. I'm a small business owner who has carved out an honest business and could pushed out if ths law goes through.
Robert D. Ashby, CMPS
on
While there are clearly some benefits from the law, there are also many "harmful to consumers" parts. Eliminating YSP is actually harmful to consumers as it eliminates flexibility in how brokers get paid. Brokers can still compete but the consumer will now have to pay is in "cash at closing" only. There are other issues in the bill that will be harmful to the consumer as well. The law of supply and demand will kick in and, ultimately, it will cost the consumer more in the long run.
Joe
on
Hey, "J F" who wrote "I am a CPA that went into the loan business part-time because my clients kept getting ripped off by loan officers and mortgage brokers." Just what the consumer needs: A rogue CPA that does loans part time for the sake of consumers everywhere. Do you wear a cape? I have never met a fellow CPA with enough time to successfully do loans on the side. What a crock!
Kirk
on
Now that fannie and freddie have the alt a and sub prime players in the market out of the way....lets let only the major banks originate loans....they'll be honest....they always are. Listen: No ysp means no broker..No brokers mean no competition for the Banks....which means the consumer gets only what the banks will give them.....Brokers get paid ysp on wholesale.....banks sell retail.....Does anyone really get it...or will this just be business as usual in washington...BIG MONEY
23 year appraiser
on
Being an appraiser in the business over 23 years I have seen a steady deteoration in ethical standards within the mortgage lending industry. This legislation is long overdue. While the originators in this room can try to sugar coat what has become a major disaster, the reality is still reality.ALL OF YOU KNOW THE REAL TRUTH. YOU ABUSED APPRAISERS, YOU LIED ON APPLICATIONS, YOU LIED TO INVESTORS, YOU LIED TO YOUR CUSTOMERS. NOTHING BUT A CHAIN OF FOOLS. THE PARTY IS OVER...
JS
on
For those who (still) don't understand the purpose of a prepay, here's another look: The lender offers an opportunity to reduce the loan's interest rate, reduce the up front fees, or both, in exchange for the borrower promising to keep the loan in place for the prepay term. If the consumer decides they want to retire the loan prior to the end of the prepay period, a penalty is due. The primary purpose of this penalty is to provide the lender (or lien holder) the return originally envisioned.
Underwriter
on
If broker's would stop abusing the system, by charging points and making YSP, this wouldn't be an issue. Revisit section 32 before eliminating YSP. The Feds shouldn't allow brokers to make 5% of loan amounts. Pre-pays are unjustified, just another way for the broker to earn income. I am sure a borrower would rather an eighth higher in original rate, then have to pay 6% of their loan balance in a couple years to get out of the 'wrong' loan. Integrity, fairness & ethical lending required.
Brian
on
This is absolutely incredible. I love the particular comment above about the guy who is a stand up broker and he is all for no YSP. Guy, i don't know about you, but i am required to take continuing ed and the 100 hrs of pre licensing training. Ever year i have to retake continuing ed and everyone here is individually licensed. No YSP is only more money out of the potential homeowners pockets. We don't work for free and neither does congress. Maybe they could pay our YSP's with their salary
Debbie
on
I think it's interesting that only one comment so far has addressed the SRP that banks get. Having worked for both a Bank and a Broker, I find it interesting that the Brokers are getting all of the blame when they are the ones that have to disclose EVERY single penny they earn, while bank DO NOT have to disclose SRP. Talk about unfair.
cezar mansour
on
My company has helped 100's of clients, meet and achieve their financial goals, and they have only received better rates or costs due to the yield spread. I offer better rates than the banks, and from the same banks that were quoting a higher rate or fee to my clients, because of the yield spread my clients have a choice and a savings that will not be offered by banks and other lending institutions... > For the sake of all my clients, and their families Vote No on this bill! "H.R. 3915"
Ryan
on
For all of you that think this is going to help the borrowers and you are finally going to "get even," you have another thing coming. Getting credit is going to become increasingly prohibitive, property values are going to deteriorate at a rate never seen before and a much higher "record" of foreclosures is going to be set. All in the name of helping the little guy. Well little guy, get ready to grab your ankles because this remedy to the credit crises is gonna hurt. Vote no 3915
James
on
ALL originators should be held to the same governing. All lenders should disclose SRP, brokers YSP, and L/O's their overage. I've worked in all 3 environs and none is better than the other. For originators, it's just a matter of finding the most comfortable way to hide from clients the money to be made. Maybe we should make the consumer responsible for learning a bit more.
Dr. Al
on
With the YSP, in addition to costs, sometimes we pay ALL of the borrower's closing costs hence, no out of pocket expenses! Banks not required to disclose YSP = NOT a level playing field because the politicians will be appointed seats on banker's Boards after retirment that occured during the Savings and Loans debauchery.
Jim
on
Art is clueless. This bill is so shortsighted it's comical. Please study up before posting.
RocketRob
on
I think that brokers should be licensed.That would help get rid of the riff raff. I also think the consumer should wise up. Since when is it big governments job to protect the consumer from themselves. Buying a house is one of the biggest transactions most people will ever transact in their lives. Wouldn't it behoove them to get a little education on the subject? Whatever happened to "caveat emptor" or "buyer beware"? Let's regulate all the jewelry salesmen too while we are at it.
lender
on
Wall street buys what it wants. Lenders produce saleable loans to sell to wall street. Brokers sell whats in fashion. Buyers buy what they need. Same as any other business. Buyers shop for cars at more than one place. They shop for groceries, clothes and household goods at more than one place. If Macy's sells white shoes for $100 and walmart has the same for $10, which do you buy? Shame on anyone who does not take the biggest investment of their life seriously.
Tara Anne Hart
on
Vote no to H.R. 3915. Don't eliminate YSP. As brokers we pay the closing costs for borrowers who can't afford the fees ~ YSP serve a HUGE purpose. I vote NO.
Dana Bain
on
Best article to date from the Wall Street Journal http://www.opinionjournal.com/forms/printThis.html? id=110010826 How to restrict lending to the poor for years to come.
Art
on
This discussion is being centered on YSP, while one of the most disturbing aspects of the bill is being overlooked. Hasn't anybody realized that the bill is looking for originators to become babysitters and big brothers of each borrower? If the borrowers gets into a loan and 6 months from the closing he's not able to pay, the first body in the line of fire is the broker, as we are the ones that are required to make the determination based on "verified information". Hello!!!!
Hugh
on
Get the bad eggs out of the business. Licensing doesn't need to be nationwide but it should be stricter. Education, qualification, & testing should be tougher. In most states if you can fog a mirror you can get a brokers license. Penalties for bad behavior need to make it quite painful if you do bad things and we should increase enforcement capability. We should do a better job disclosing compensation no matter broker or lender and we should have a fiduciary responsibility to our clients.
Angie
on
No No and No. This is not the right time!! This will create monopoly in our industry
Riick
on
Too many MB have been unethical, and there to serve themselves and not their client. As an appraiser I hear "I just want to help out Mr. X here, we need no less than $xxx,xxx" Help Mr. X into a loan he can't afford? Mr. X takes out $10k NET cash & MB makes a $5k YSP profit on a $175k loan. Who's helping who? As to Prepayment Penalty BS! Penalty only to year 2 or 3, and at year 4 the investor has made back to potential loss? BS - I can use a financial calculator too you know.
WHY???
on
This law is ridiculous. Congress has had the wool pulled over their eyes by Banks. Let's remember that one of Barney Frank's largest campaign contributors is the banking industry. I wonder if this is why he is for eliminating the 52,000 mortgage companies that would effectively go under overnight if this bill becomes law. 65% of all mortgages are originated by MB's.
WHY???
on
I guess the big banks will make out like bandits. As for those "conscience-minded" appraisers voicing their support of this bill, are you an idiot? If stated-income loans disappear and brokers disappear, do you really think you will have any work? No, just the few bank appraisers will be left.
RUKidding
on
What happens to real-estate agents, title companies, wholesale divisions, appraisers, account representatives, all subprime lenders, on top of all the mortgage brokers that will either be out of business or severely broke and still open. This could lead to hundreds of thousands of people out of work not to mention the thousands of consumers that will no longer be able to get loans.
Unemployed Underwriter
on
HR 3915 should have been redrafted to compromise and meet the needs of all involved. As a front-line underwriter and purchasing funded loans for secondary and wall street, I have found that many subprime brokers, lenders, title, escrow and attorney fees were charging excessively. YSP, origination, discount and junk fees. Just like wall street, all were greedy for the day and superseded what the future would bring which we all know ended up to be foreclosures.
Erin
on
I think that we all got a bad rap because of inexperienced loan officers.Let's also look at greed that brought us to this point and not forget the common individual who thought they could bang it out of the park with real estate.Let's also look at the consumer who thought they could afford more. In history we looked at property as being a place to raise a family and because someone said it was an investment, everyone thought that way.Lets go back to that train of thought, our home is for family
RocketRob
on
Let's see, the politicians will make it more expensive to get a mortgage and then let's outlaw the mortgage interest deduction so the entire housing market will collapse. We can level all the homes and build projects for everyone to live in. Only the politicians will continue to live in a house, because they will exempt themselves from the interest deduction. I am going to retire from the mortgage industry and become a politician. Once they are done, it will be the last viable occupation.
bigbadbanks
on
someone changed my name LOL -Fraud on the website! Anyway, CPA, appraiser, Broker, lender, close atty and all your staff get ready for the unemployment line. Hope when we need to be bailed out or congressmen cut us a check. Does anyone have an estimate of how many are out of work so far? Not to mention the home improvement guys, buiders, cashiers at home depot....
Michael Schindler
on
Why is YSP or even SRP even an issue? Do other industries have to disclose the same? I bought gas and a pack of gum today, does the gas station have to disclose what it will gross on either product? This is disturbing-there is no one entity at fault for this mess it ends up being greed-greed from wall street, lenders, mortgage people and home buyers equally. This is going through because of the timing of elections, its an election ploy. By trying to fix it now just makes it worse!
Mary
on
I agree that it should be tougher to get a Mortgage Brokers License but this is already regulated at the state level and should remain there. YSP and SRP are already disclosed in New Mexico and Idaho. The elimination of these methods of payment would only hurt the public as their closing costs would increase. Most states and Lenders already regulate the caps on these and it should stay that way. The Federal Government should stop writing legislation on something they do not understand.
Jeff
on
Something that seems odd to me. Why can a real estate broker charge 6% to list your home and nobody raises an eyebrow. Yet when a lender charges an orig fee of 6% everyone goes crazy. The real estate broker has virtually no risk the day after the property sells, while the lender is on the hook for the life of the loan. I am all in favor of DISCLOSURE, DISCLOSURE, and MORE DISCLOSURE. However I have a Fundamental problem with the government telling me what I can and cannot do with my property!!
CR
on
Why would a Mortg. Lender have to disclose SRP's??? As a Direct Lender, having SRP's actually gives the LO the ability to give someone par pricing and make your points whereas with a Mortg. Broker, it's 1pt Orig. and 1 pt YSP. To get the 1 YSP, the rate you're giving the consumer is higher than what they could actually get.
Bookem
on
All aspects of the industry as we know need to be put in check. Lenders, appraisers, banks and even the title companies are regulated. How has time past without brokers being scrutinized for ethical and professional practices? As a vendor, I've walked into broker call centers populated with ex-con and soon-to-be's sitting along with other uneducated unscrupulous LO's that mislead consumers out of their money. It should be a crime anyway. This SELL SELL Boiler Room mentality had to end sometime.
Ed John
on
I'm a wholesale rep. I DONT make YSP, which is NOT the biggest issue here. 1) everyone Must qualify full doc PITI at the fully indexed rate (today thats about 7.25%) Everyone on this board is 1099 or S corp. and NONE of us could qualify and most of america couldn't either unless home prices fell 60% from current medians. 2) Closing costs and prepays can NOT be financed, so EVERYONE will do no cost loans unless they have an extra 6K+ laying around. 3) now we're to YSP as NO broker can do no cost.
Brandon
on
I think all the mortgage brokers complaining about this bill should have thought about the possibility of something like this happeneing when they were selling 100% loans to people with 580 credit scores, going stated income and falsifying documents so THEY got paid. This isn't an industry that can point a finger a one entity, everyone plays an equal role. I think it's about time the government is stepping in to take control of something that has FAILED!
Anonymous
on
Let's not kidd ourselves, this bill is about a few things... '08 elections and the government making it a point to only reward the top echelon of people. Because no one should be compensated in such a manner without having a doctrate or phd in mortgage disclosures.
jean
on
HR3915 is coming whether folks like it or not. It's a done deal. When people don't regulate their own behavior, then it is usually done for them. Why would the mortgage industry be exempt from this?? Hopefully this will flush down the greedy, self-serving people from our industry and allow them to return to their retail careers in time for the big holiday rush!
Ty Youngblood
on
Who Moved My Cheese? Now that we know the wheels of change are in motion, what are we going to do about it? Continue to say, "the sky is falling?" With large parts of the bill directed at brokers (me) not Retail and Correspondent, there will be a big shift into those safer areas. Net branching will become a flight to safety, Wholesale will consolidate but still find a way to pay YSP (ie pay the borrower YSP and then credit back to broker). Stay informed, keep posting and Move With The Market!
Dan
on
So i want to buy a house and i go to my local bank and thier loan officer (commisioned employee) offers me a 7% rate 30yr fixed at 100% ltv with 3k in costs.I check with a broker and he offers 6.75% same terms and costs ( but is a broker) which one do i go to? BROKER! I find out that the broker made money from the bank he placed me with and still beat my bank! Good he did his job and got paid for supplying me with a better loan.HOW MUCH WOULD THE BANK L.O. got paid ?? Who the hell cares! I won!
scott
on
Are we in America? Can I go to the local car dealer and tell him he cannot make a profit on financing a car (which by the way is the same pratice). If you are of right mind and body and you know what profit Im making and you are OK with it what right does the government have to interfere with the free market. Name me one business that does make a profit...oh the government. Good luck to ANY borrower that doesnt qualify for Fannie or Freddie becuase there will not be a broker around to help!!!!
Brian
on
I understand that yield spread premium does have benefits, however it has been abused. If I qualify for a 6% rate, I should get a 6% rate, not 6.5% just so the originator can get paid. That extra half point just cost me several dollars on my monthly mortgage payment and thousands in interest. (depending on loan amt). The entire process needs overhauled, please lets get the mortgage broker out of the industry.
Marley from Jersey
on
YSP may be revised out before it get's to White House. Know your Bill if Rights and how the voting works. To all those who are mad its quite frankly that you are the ones who have been affected I don't hear any complaints from the knowledgable and honest people in control of their mtg. Face it all in favor of HR 3915 are looking for Miss America to bail them out but guess what? Go to trail with the predatory lender's cuz thats the only thing HR 3915 is going to give you the right to do. Pray!
Kate
on
As a former loan originator I agree that overhaul is necessary in the mtg industry especially as we have so many orig that do the industry harm. I belive in suitability and disclosure standards as I have always practiced this belief. My clients ALWAYS knew upfront the difference in a no cost or lower point loan would be, it meant I would earn a YSP...they knew this cause I believe in responsible lending and educating the borr. HR 3915 is the extrme because this ind. cannot self regulate.
Responsible R.E. Industry
on
Posted By: HR 3915 Mortgage Reform Resources? the above comment. It is obvious that the only people who feel that HR-3915 is good are Realtors. It is time Realtors, who charge 6-9%, realizing they are no longer needed,as with news papers,the internet has made them obsolete...pressuring appraisers ? Appraisers can only value recent sales.Realtor's own adds say they sell16% higher than owners. Legislation? Closing costs- 5.99% total foreverone involved-exception Realtor's.Biggest lobby?Realtors
NYLO
on
Simply put, the ysp and/or points have absolutely nothing to do with whats going on in the real estate market. Maybe in the case of option arms, but besides that the payment is the payment. The yield spread generated had no bearing on this foreclosure mess. It was simply greed by all parties involved. I strongly believe that LO's should be screened and tested to be licensed, but to remove ysp will probably put close to 1 million people out of work. (400k broker employees, title comapnies,etc..)
Kim
on
I'm sorry but why is all the blame being directed at the mortgage brokers? Why is it that no one dares say that the homeowners may have a responsibility in this as well? I have been a broker for 10 years and have never had a client that didnt know exactly what they were getting into. I have actually tried to talk people out of the more expensive homes or even buying at all due to income but everyone wanted to jump on the bandwagon and make a quick buck.
daniel
on
I am confused with this whole deal. It starts from the top, the demand for higher yielding investments led to the creators of subprime lending. In return these "lenders" pushed the products on brokers and showed them the "pot of gold at the end of the rainbow". Yes, there were many UN-ethical mtg brkr's out there, but by all standards....even the most moral had no intentions of placing the borrower in harms way. Make us all get our financial advisor's license first then the brkr lic!!!
Anonymous
on
YOU ARE ALL MISSING IT! All borrowers MUST qualify by FULLY documenting their income, self employed or not. What will that do to the price of homes in your area? The few that do now qualify won't after the price drops this bill will CAUSE! See above title II summary.
Dean
on
What people are really missing is the fact that many people do not have any savings to put down on a home. As brokers we can make YSP to make up for it. Without being able to make YSP we are forced to put our fees on the front which will cause many people to not be able to purchase a home. Brokers can't work for free, we have bills too. Limiting the amount of YSP we can make is one thing, but to eliminate it is going to severly impact the mortgage and housing market.
Dan
on
Here's the deal. The real estate industry has already found all the suckers to take these sub-prime loans so what difference will this bill really make? Did HR3915 have anything to do with the sub-prime collapse? No! The bottom line is that these people could not afford a house/condo in the first place, for that matter most of them wouldn't even qualify to purchase a new car. Bush quote: "Thanks to our policies, home ownership in America is at an all-time high." Yippie! Now what?
Burtman
on
For the biggest investment of your life, buying a home.......most never take the time to really educate themselves. But the fact is that there are alot of crooks out there. They will find a way to get their yield one way or another. Just give them time to think...and wait for the next crash! People want things and are willing to try to go for it...good intentions don't always workout. It can happen to any of us no matter how much money you may have disaster is always just around the corner.
Linda
on
Brokers? Thousands of Dollars for? I did NOT pay to have $2,000 Inflated Income on the TRUTH IN LENDING>FEDERAL
Steve
on
As a self employed borrower, I will never qualify for a mortgage again, despite 20 years of never missing a payment and a stellar credit score. This bill will rip us all out of the market, and the drop in demand will cause a real estate depression. No one is EVEN DISCUSSING whether requiring full income documentation is even a good idea when it is a time bomb ready to launch a real estate depression. Self-emplyed are not unsophisticated borrowers, the market should decide how risky we are.
Jennifer
on
As a former MLO I am disgusted by this bill. Like most loan officers I educated my borrowers and fully disclosed my borrowers because a happy borrower will refer people, tell their realtor, and my business will increase...duh! It is the keep up with the Jone's consumer who couldn't afford the big house but just had to have it and now are in default on their loan that gave the entire industry a bad rap. The mortgage industry is not to blame. I don't recall a borrower ever having a gun to their head at the closing table. I don't recall a borrower ever being coerced to sign closing doc's. But because it is easier for Washington to blame big bad business rather than whiney and unwilling to take responsibility consumers we are the ones that get to bear the brundt. I can't wait until one of these congressional schmucks tries to get a mortgage...please whomever the MLO is...stick it to them!
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