Be sure to watch this short video from NAMB http://namb.org/namb/Urgent_Call_to_Action_on_LO_Compensation.asp

Looks like everyone is staying away from this post; maybe I'm the only one left. I was under the impression this was a done deal; voted on, signed, sealed, and ready to go April 2011. Anything changed? On a side note, I walked into my bank that I do business with for my checking account and talked to the teller about her mortgage. She told me she has tried to get information about mortgages from the people that she works with and they are completely clueless when it comes to mortgages. Interesting to say the least. This is where the consumer is headed.

Bill Smith:

I was under the impression this was a done deal; voted on, signed, sealed, and ready to go April 2011. Anything changed?

There is a lot of speculation that it might be changed through legislation. Certainly nothing will happen if we all don't support NAMB in their efforts on this. It takes lobbying and that costs money. Every loan originator or mortgage broker needs to donate at least a $100 to try to preserve their future livelihood. If you are a mortgage broker or a loan originator at a bank or licensed with a mortgage broker you need to give yourself a Christmas present and donate at least $100.

I donated let us know if you did or when you do!

A couple of things - almost all the banks have a separate empolyee lending division - and the retail bank loan officers are completely out of that loop and not allowed to originate an employee loan  - and this is by bank design - so it could be that the teller does not understand the process - or does not like the internal loan by phone most banks have in place. 

Second, the complensation package, as I understand,  is dictated by the Fed - there is no law or legistlation involved, and from all I have listend to with MMG, CMPS and my own company - every bank and broker is working to have the rules and compensation changed - and they are pushed back every step and being told this is the rule and it will not change.  We can put all the pressure on our law makers we want, but unless they are on committee with the Fed - there is not much they can or will do to step in and push for change. 

Jennifer Buchanan:

We can put all the pressure on our law makers we want, but unless they are on committee with the Fed - there is not much they can or will do to step in and push for change. 

I have read and listened to many seminars on this issue too and agree that it is a long shot that this will be amended or changed. Stranger things have happened and all I know is that for $100 there is some chance that change might happen. It's kind of like buying a lotto ticket. There is a 100% chance that you won't win if you don't buy one. NAMB needs a donation to keep up the fight. If you think it's worth it send them $100. If you have decided that there is absolutely no chance then save your money.

What would happen if on April 1st we all refused to take loan applications?

Bryan, I hope this is changed or at least given another look; I was under the impression the Federal Reserve cannot be lobbied. I have not donated as of yet. 

Bill Smith:

I was under the impression the Federal Reserve cannot be lobbied

The MBA hasn't assumed that the issue is over, they sent a letter to Ben Bernake on 12/16 outlining their concerns. I don't know if that is lobbying but the MBA articulates the banks side of the issue because of the money that it receives from banks. The only organization that is going to put the LO and Mortgage Broker perspective into the mix is NAMB. For them to do so takes money. If any of you think that it is important to have someone on your side then send them a $100. You can get the links to do so in the first post above.

The rule as written has a number of unintended consequences, as pointed out in the MBA letter, which need clarification. However, other than those issues, are there any good reasons why loan originators should continue to be given an incentive to put a customer into a loan with a higher-price or less advantagous terms? 

"Is there any good reason to put the borrower in a higher price"? Yes, of course. It's called competition! The way things look now, we'll have one really super low rate that everyone can enjoy. Yay. Don't let the door knock you in your rear end when you leave the building. No disrespect here but I do wonder what the average ages are of the LO's in this thread. Can't you see the slippery slope this is leading towards? How about if we tell dentists, doctors, lawyers, all salespeople in all trades, retail owners in clothing, shoes, jewelry, and any other goods how much they can charge or mark up on their goods? This is a very disturbing trend taking place here; soon, every aspect of your life will be regulated and controlled starting with your work and livelihood. I'm glad at least the MBA and a few other groups are bringing this issue to the table. Remember, without competition, there isn't any need for people like us. We'll just be paid as nothing more than order takers.

Interesting comments, but I do not believe the new rule does those things. I agree that there are good reasons to “put the borrower in a higher price.” For example the borrower may request a higher interest rate so that the pricing premium can be used to help cover closing costs. The new compensation rule does not prevent that. Further, the new rule does not reduce competition between or among loan originators for a customer’s business, and the rule does not tell anyone how much they can pay their loan originators or how they must price their loan products. The rule does prohibit paying loan originators based on the terms of the loan. 

Are there any good reasons why loan originators should continue to be given an incentive to put a customer into a loan with a higher-price or less advantageous terms? 

None of this is a surprise.  It's been writing on the wall for a few years.  The era of  being a small broker and making big easy money is OVER. Finished. Done.

The idea that pulling in 3 points YSP on a loan is some gift to mankind by "experienced" mortgage people who are out there helping the consumer is laughable. At least be honest about it....the money has been great and easy. Consumers HAVE been uninformed and a lot of us have benefited from their lack of understanding of the mortgage process.  The government has decided protect people from their own ignorance and the natural inclination of people "in the know" (you and me)........to take advantage of the situation. The truth is that people have been overpaying for mortgages.....and savvy loan officers have made a bulk of the money due to this overpayment.  Myself included.

Look....if guidelines are going to be put in place and actually adhered to and followed...then as time goes by the process will become more and more automated and the need for traffic cop loan officers making big money will be less and less. Like it or not...thats where things are headed. Marching on Washington with a torch and a pitchfork is not going to change this.

Plan accordingly!

VanbytheRiver,

The goal of this legislation is admirable. However, what you do not understand is that the rules as they are written will squeeze competition and allow a small cartel of lenders to fix prices in the market at a higher level than they exits today. What this legis;ation does is takes away the ability of a savvy consumer to shop for a good deal and passes a higher price along to all.

Thanks,

Jason

Looks like some of you have guilt issues about making good money in our business. There's nothing wrong with making good money and there should always be a spread of pricing in our business as well as any other business in our economy. Do you really want the government to decide what is "advantageous" and "priced right" for you? Why do you think we have a myriad of disclosures for our borrowers? I believe most of the people in business and especially ours would and are going with a conservative mindset on this and want less government regulation, not more. The recent elections are proof enough and bear this out. 

Guilt? No way. It's been great. This has nothing to do with guilt or the last election (good grief!).  Get real. This is not the time to be lobbying for "less disclosure" in the mortgage business.

You are on a boat. There is a storm cloud on the horizon and it is coming directly your way.  The wind has already swithched direction. You can shake your fist at the clouds or you can plan on what you are going to do to stay a float.

Regardless if you agree with the new laws it opens pandora's box to regulation by the governement in all fields at some point.

As a car consumer I would like to get the best possible price without paying a dime more.  Do I expect to buy it from the dealership at the same cost they got it from the manufacturer?  No, but if I do my home work I should be able to find a very competitive deal based off research.  If i don't do my own research odds are I am going to end up paying extra. 

It is the same concept with many lines of business.  The mortgage industry was out of control from 2001-2007 and some consumers were taken advantage of and way to much money was being paid out to companies and originators on deals.  On the retail side we are now capped at  1 pt over and in Chris Dodds case 1 pt under on a par rate.  If they could adopt a structure similar to that on the broker/correspondent side I think we would all be okay with it.

I took an application last week from a lady who is in the health industry and I listened to her vent for 20 mins about the different pay structures and issues they are having in her industry.  If I closed my eyes for a minute I would have thought I was back in my office listening to originators complain about the same thing.  The thing that shocked me the most was listing to her tell me how Dr's and health insurance agents she has worked with for the past 30 yrs were getting out of the business all together due to all the new governement regulation.  She feared that by 2012 or 2013 there would many unqualified doctors in the field. 

I can only assume this will be the case for many of us in the mortgage world.

Some times we get what we pay for as consumers.  If we want regulation and price fixing be prepared for the customer service that will likely follow.

Origination will always be a customer service driven industry no matter what the government does.  Those who respond with a positive attitude and find a way to make it work will survive.

Jason Harris:

The goal of this legislation is admirable. However, what you do not understand is that the rules as they are written will squeeze competition and allow a small cartel of lenders to fix prices in the market at a higher level than they exits today. What this legis;ation does is takes away the ability of a savvy consumer to shop for a good deal and passes a higher price along to all.

From my perspective Jason summed it all up in a few words. "allow a small cartel of lenders to fix prices in the market at a higher level than exists today"! And I would add, at the same time reducing their loan originators compensation thus increasing bank profits even more.

Read Henry Paulsens' book "On The Brink" if you think that the FTC works in a vaccuum.   

Hope those of you that haven't given up hope on this do kick in $100 to NAMB. If you are a broker there are issues other than compensation that may be of concern to you and there is no one else that is going to fight this one out for you.

After reading the final rule, I feel those rules is only good to protect borrowers from option ARM with prepay penalty. Today, no one is offering those kind of program any more. Greedy loan officers / brokers were just the leaf of the problem. Fed and banks are the root of the problem. Now, banks got tax payer's money and Fed made new rules. The new rule is trying to fight non exist problem. It will only penalize those are still in business today, most of them are the honest ones.

Fed clearly knows all the complaints from mortgage industry if you read the full version of the final rules. There is no way to change Fed's mind now.