Borrowers need to be aware that many mortgage brokers are choosing to raise fees to maintain their income on each loan transaction. Following is advice from one major wholesaler to their broker customers:
THE NEW GFE
See the original GFE given to the Customer - Line 1. Contains the following:
Origination fee + Processing Fee + Lenders Admin. Fee + YSP
(plus any other compensation / fee that the broker charges). Once you give the GFE to the Customer your line 1 will not change higher (except if the loan amount changes your origination will be adjusted up or down if a percentage was used).
Line 2 shows the credit that the Customerwill receive (YSP).
So Line A is going to be what is earned on this loan (Original GFE).
Many brokers still think that by increasing the YSP they earn more income on a loan.
Is this TRUE? Answer is NO
If you add in the YSP in Line 1, then subtract it in Line 2 (the credit that goes to the customer). What are you making from YSP?
$2,085- $2,085= $ 0
Now see the New HUD at Closing
Line 801 is from the Original GFE - Line 802 the YSP = Line 803 Total Broker Compensation
Suggestion on How Brokers can make money in this new environment.
Since higher YSP do not increase your earning, it only increases the Credit to the Customer to reduce their costs, you may want to look at charging more Origination Fee (On Conventional & FHA loans, VA limit is still 1%) and as little as possible YSP.
Line 1 - Origination 2% + Processing $450 + Lender Admin $775 + No YSP = $8425
Line 2 - Zero YSP
Line A (income to broker) $8,425
This will made a big difference in the Broker compensation. Plus the Customer benefits by receiving a lower interest rate.
Conclusion- in this new environment the only time to charge a YSP is to lower the closing costs for the Customer (as in a low or no cost refinance).
My Conclusion is that Mortgage Brokers are and will continue to raise fees to cover their operating expenses and profits. Banks and Mortgage Banks continue to have the flexibility to price their profit into rate. Is this fair? Probably not to mortgage brokers...but it does save the consumer from the game playing that many abusive brokers used to play with fees. The question we really need to ask; Did abusive brokers kill the golden goose?
Art Marine
Branch Manager
Academy Mortgage
10220 SW Greenburg Road, Suite 250
Portland, OR 97223
503-764-4005 direct
503-799-7085 cell
1-866-510-4716 fax
art.marine@academymortgage.com
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