Hi Everyone,

Is anyone familiar with the detials of this plan?

Are they going to allow retail loan officers at the Banks to sell no points loans where the loan officer is paid a commission?

Any chance that the NAMB is going to have any success in killing this proposal.

Seems like they are trying to regulate us out of exisitance with this. Why don't they regulate the Wall Street firms that securitized all the sub prime mortgages out of exisitance instead, and then regulate out of exisitnace the rating agncies that graded the garbage securtiies as AAA?

I guess you kill the weakest animal in the heard, which is sadly for us, the Mortgage Broker.

Thanks for your comments all.

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There will be a 120 day comment period before the final ruling. This type of legislation has been talked about for years. Does the Gov't even understand the true mechanism in question? When something is offered at "wholesale" and sold at "retail" there is always a margin to be earned. Wholesale interest rates are priced for a markup. Doesn't anyone in power understand that?  

There is no difference between YSP, SRP, and Retail Upsell. Then entire industry works the exact same way just with different names. It's really sad that only one of the three origination channels is having the proverbial finger pointed at it.

Seth Steinberg:

detials

Seth Steinberg:

heard

Seth Steinberg:

exisitnace

Seth Steinberg:

exisitance

Seth Steinberg:

exisitance

The trophy I won in 7th grade for the local spelling bee just can't let those ones slide.   But on a more serious note, what is the # of this bill that has been introduced?

So sorry for the bad spelling Curt.

I was in a hurry and in such a foul mood when I wrote the post that I didn't take the time to proof read it.

Thanks for the corrections.

There is no bill number as this is not a measure being proposed by the House or Senate, but rather a new directive coming straight from the Federal Reserve who is in a rush to do as much regulation as they can lest they lose their oversight powers to Obama's newly proposed Consumer Products Tsar.

Seth ~

Hi there Bob,

Thanks for the information about the 120 day period, and for your shared outrage at this feeble attempt by the FED to appease it's critics. 

Great point you make!

Why would a broker of any product or service be precluded from marking up the product and making a living. If the consumer doesn't think the product is competitive he should simply not buy it.

The sub-prime mess wasn't about lack of understanding in regards to products being offered, it was about Wall Street offering a "call option" on the price of real estate. Now that the strike date has come and the calls are worthless they are blaming the brokers for selling the calls. The charge that the consumer was victimized in that they didn't understand they had taken this "call" position where they could only win if values kept going up is BS. The consumer knew the upside to the position in great detail, and knew the down side too. It's like losing at the crap table in Vegas and saying, "hey my hard way bet didn't pay off and I lost. I want my money back, I didn't understand". 

They don't blame your local drug store for bad drugs that Pharmaceutical companies produce. The drug store is just the distribution point, it doesn't dictate what products are sold.

As Charlie Brown once said, "Good Grief"!

Seth ~

Has anyone heard or read any new info about this subject?

Its HR 128: http://www.govtrack.us/congress/billtext.xpd?bill=h111-1728

I have seen nothing that indicates the proposed ban will affect only brokers...based on the text of the house bill it should limit compensation for all origination channels

Well..........Mortgage Bankers are treated a little differently.  The HUD FAQ page that I've seen says that since you don't know how much a banker might be able to sell a loan for, then there is no burden to disclose what it will be.  That is a bunch of hogwash, but obviously the mortgage bankers lobby is better than just the plain ol' mortgage brokers....  Example, I want to make 1.5% on all my deals.  I typically would price 1 front and .50 ysp.  Under new rules, I quote 1.5%, but then credit the borrower .50 from the ysp, so they are still only paying 1% out of pocket.  If I'm a banker, and I want to do the exact same thing, I quote 1.0% front and I'm done.  There is no mention of how much "credit" the borrower gets from a particular rate.  Of course, mortgage bankers know EXACTLY how much they are going to earn on each deal, but they are not disclosing it.  That doesn't limit anyone's compensation, it's just disclosed differently.  Bottom line  - all originators still compete based on rate and total fees.

By the way, the new GFE that HUD put out....does not have a signature  line on it.  Brilliant.  So we are disclosing more, but since there is no signature requirement, how would you know if the borrower ever saw it......who thinks this stuff up?

Answer to "Who Thinks these things up"?.... the very same people that brought us the mortgage collapse we're presently experiencing, except now, they've gotten more job security and another bonus!

In addition to the signature line on the new GFE how about the fact that the form does not disclose the cash needed at closing.  The form does not tell the borrower the down payment, The form does not take into account seller paid closing costs.  The form is incomplete and not nearly as effective in terms of the financial disclosure as the current gfe.

ross l. miller

miller home mortgage, llc

the comments below are from the comptroller of the currency for the United States, John Dugan.  If he believes this then we will have a hard time trying to level the playing field:

Today's severe consumer credit problems can be traced to the multi-year policy of easy money and easy credit that led to an asset bubble, with too many people getting loans that could not be repaid when the bubble burst. With respect to these loans - especially mortgages - the core problem was lax underwriting that relied too heavily on rising house prices. Inadequate consumer protections - such as inadequate and ineffective disclosures - contributed to this problem, because in many cases consumers did not understand the significant risks of complex loans that had seductively low initial monthly payments. Both aspects of the problem - lax underwriting and inadequate consumer protections - were especially acute in loans made by nonbank lenders that were not subject to federal regulation.

In terms of changes to financial consumer protection regulation, legislation should be targeted to the two types of fundamental gaps that fueled the current mortgage crisis. The first gap relates to consumer protection rules themselves, which were written under a patchwork of authorities scattered among different agencies; were in some cases not sufficiently robust or timely; and importantly, were not applied to all financial services providers, bank or nonbank, uniformly. The second gap relates to implementation of consumer protection rules, where there was no effective mechanism or framework to ensure that nonbank financial institutions complied with rules to the same extent as regulated banks. That is, the so-called "shadow banking system" of nonbank firms, such as finance companies and mortgage brokers, provides products comparable to those provided by banks, but is not subject to comparable oversight. This shadow banking system has been widely recognized as central to the most abusive subprime lending that fueled the mortgage crisis.

It seems to me that the part he left out was that most of the lax underwriting was from the Banks themselves.

Ross Miller

Thanks for this comment Ross.

"Shadow Banking" - I love that term, I'm going to change my title from "Loan Officer" to "Shadow Banker"

To date there are less then 300 comments to the new Reg. Z bill which is kind of concerning due to the potential impact it would take to our industry.  Here is a link to comment on the bill and also view what others are saying. Time is ticking.... I'll be typing in my 2 cents worth.

http://www.federalreserve.gov/generalinfo/foia/proposedregs.cfm

HUD just published a Q & A as it relates to the new 3 page GFE They just disallowed any POC  from Lender to Broker, it now has to be shown as a credit on the HUD 1 in section 800 as a credit to the BUYER!!!!!  so for a no points deal you woudl have to show a cost to the buyer of one point and the credit to the lender to the buyer would pay for that  SOOOOOO it will look as if all Brokers are charging much more than any Stinkin Banker who gets the same YSP

Rod

The Banks will use this crisis to steal our market share

Here is the link below... The good news starts at page 10. 

For anyone who originates loans for a living, or knows someone who does, or who didn’t comment during the HVCC comment period and wish they had, you should know that broker compensation is in the hot seat. The Board of Governors of the Federal Reserve is accepting comments until Christmas Eve regarding the TILA changes. Highlights include page 178 (43408) which contains the new proposed broker compensation (little or no rebate will be paid; the broker will not be paid upon any of the loan characteristics and will have to charge a flat fee or an hourly fee, etc.) Also worth viewing are pages 43279 - 43285 (page 49 – 55) (beginning with “Background” on the bottom of page 43279). 

http://edocket.access.gpo.gov/2009/pdf/E9-18119.pdf or

http://regulations.justia.com/view/152199/

Everyone has been asking about the possibility of YSP going away. Well, here is your opportunity to do something about it.

The Federal Reserve Board has issued a final proposal on a rule that would require mortgage lenders to pay all originators (bankers and brokers) a flat fee, which would be stated upfront and would not increase based on changes in the interest rate or other loan terms. The mortgage industry has until Dec. 24 to comment on the change to the Truth in Lending Act rule, which is described as an attempt to regulate how yield-spread premiums are set. The Fed also has proposed another rule involving TILA that would create a new set of disclosures for home-equity lines of credit and new protections for borrowers. Too many times, we hear about and are forced to implement a rule AFTER it has been accepted . This is your opportunity to have a voice and comment on proposed changes BEFORE they are accepted! Take advantage of this opportunity!    Basically, YSP and SRP would go away and replaced with a flat fee.

If you would like to comment on the proposed rule go to:      www.regulations.gov

Where is says “enter keyword or ID”, enter the proposed rule,      FRS-2009-0240-0001

Then click SEARCH - It will bring up the proposal and you can view in either PDF or HTML format and post a comment there.

Ben Mabile:

Here is the link below... The good news starts at page 10. 

Just starting to read this...thanks for the link.  Don't know why NAMB didn't send it out to me?  I've received 5 emails about the upcoming Convention, but none about this....

this is for brokers, not correspondants or retail...Lucky to be me...