April 1st is pretty much here. Why is this such an important date? Because the implementation of the Loan Officer Compensation Rule goes into effect. The short description of this rule in that lenders, mortgage brokers, and loan officers can no longer be paid a portion of earnings from the lender and a portion of earnings from the borrower. This post is not intended to explain the rule in detail, but to illustrate to agents the extreme importance of discussing with the buyer's lender the terms of any sales concessions involved in an offer.
The reason this is so important is that once a borrower indicates a property address to a lender, the lender must provide a Good Faith Estimate to the borrower dated within three days and those numbers are firm and cannot change. This gets extremely complicated by the anti-steering implementation of this new rule. The lender must provide the borrower with at least three options for financing:
One will be par rate, with borrower paying everything.
Two will be a lender paid origination but the borrower paying all other fees.
Three will be lender paid everything, a.k.a.- a no closing cost loan.
When the borrower is paying their own costs, only certain costs can be paid for by the seller- loan officer compensation is not allowed to be paid for by the seller. That said your borrower needs to know exactly what option they want before the lender can suggest a number to request for seller paid closing costs. The range will be pretty extreme. It is also not as simple as looking at a good faith estimate or using a standard percentage like many agents do.
Take the time to discuss each offer with the lender before submitting the offer. It will save you a headache later. Also, now is a great time to have a discussion with your trusted referral partners in the lending world about the detail of these changes so that you have a full understanding what to be aware of. Now for some personal commentary about this rule:
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