I was just sent a link to sign a petition against a proposed Bill H.R. 3915 written by Miller, Watt, and Frank. which effectively will annihilate the mortgage brokerage industry. Here is the link to the Bill http://www.house.gov/apps/list/press/financialsvcs_dem/subprimeleg.pdf This legislation is geared to remove the financial incentives paid by lending institutions to brokers as a means to attract loans. In short, these wunderkind politicians have seen the light to solve the mortgage industry crisis and simply put, it is to only allow broker licenses to individuals with substantial net worths (increases limit from $25,000 to $100,000); to force brokers to act solely as agents (not able to go to the free markets); and to eliminate financial incentives (Yield Spread Premiums) paid by lending institutions to brokers. Clearly they have concluded that brokers are the single reason for the current mortgage crisis. It should not surprise me that our government once again holds voters free of responsibility and chooses to blame one segment of an industry responsible for effects of the free market at work. YSP is nothing more than the free market at work. It is a mechanism for lending institutions to influence the markets as needed to achieve its own objectives. YSP is simply how much a lender is willing to pay a broker for delivering a loan at a certain interest rate. Every bank offers differing interest rates on Certificates of Deposits or savings accounts depending on that specific institutions liquidity needs at a given time. Mortgages of various loan structures and terms are no different. Every lender offers different rates for each type of mortgage they offer based on a multitude of factors such as their respective demand for certain loan types, interest spread margins which ultimately lead to net profit margins, appetite for risk, among other reasons. The fact that brokers actually responded to the various associated YSP incentives is somehow a problem explains a lot about our legislators. If they relied upon people to act rationally, none of them would have jobs. To think that removing YSP's paid to brokers will in any way remedy the mortgage crisis or help avoid a repeat in the future is pure ignorance. Brokers do not set YSP levels or approve loans, lenders do. As the president of Equity Advantage Mortgage Corporation, I come from a strong commercial banking background. In my 22 year banking career, if you made stupid underwriting decisions, you ended up with a bunch of bad loans and lots of loan losses. My salary had nothing to do with it. The credit policy of every bank is different. That is why banks with very loose underwriting guidelines make a lot of money when they are originating loans, but suffer the greatest losses and fail when all those bad loans come home to roost. More conservative lenders, I assure you, are not suffering the same fate of losses as the "anything goes" lenders are. The free market place is merely shaking out all the loans which never should have been approved. It was not the fault of the brokers (save those who committed fraud in preparing loan applications). The lenders themselves reviewed every single file and funded every single loan, and some lenders actually did decline loans that others took with open arms. Borrowers are also not excused from knowing that their payments had the potential to increase 30% a month in two years and that they had no legitimate way to ever afford making those payments. I am not trying to lay off blame as there is a lot to go around. My issue is that unfounded and clearly poorly thought-out legislation to declare brokers as the cause of the problem and thus to eliminate their right to compensation is something we simply must not allow to stand. I subscribe to economist Adam Smith's invisible hand theory which states that the free market will intervene (thus the invisible hand) and cause the market to return to equilibrium. Lenders which had very loose underwriting guidelines will suffer losses and/or fail. In certain cases, where brokers were involved, the recourse to the brokers has been invoked and those brokers have suffered losses and/or failed. The invisible hand is causing lenders to tighten up loan underwriting standards to avoid suffering future losses. If not, they will fail. The investors in the secondary market have cut and run from purchasing new mortgage backed securities until they are satisfied that the new loans are underwritten more conservatively. All of these events are inter-related and force the markets back to equilibrium eventually. I recognize that peoples lives are being devastated in the interim, but legislation will not serve to ease that problem, certainly not this legislation. So ask yourself why so many loans are going into foreclosure now. If you wanted to make bad loans, there is no shortage to be had now and you could have perhaps several million very happy customers. But alas, the lenders will not underwrite those loans now, nor will investors purchase the portfolios, so the existing loans will result in foreclosures. This is the Invisible Hand principle at work. Why these small minded legislators think that eliminating YSP's to brokers is somehow the answer is baffling to me. The market forces are working just fine. I believe in democracy and freedom. I have the right to make a living and I already have legislation I am subject to. Guess what, I can't get a loan approved now that I could have six months ago and it has nothing to do with my YSP, or even my RIGHT to be paid a YSP. The lenders simply have tighter guidelines now. Thank you Congressmen, but we don't need your "help". Try and justify your existence some other way. I have already written my Senators and Congressman to urge them to vote no, as well as signed a petition http://www.petitiononline.com/HR3915/. Please make your voice heard as well. It's up to us to ensure this legislation does not pass. | 
;)
Links;)
Tags (Tag Cloud);)
Archives
Barny Frank is a jackass. He should stick to the gay escort business and stop ripping off America.