Senate Votes To Ban Mortgage YSP and Stated Income Loans

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Services for Real Estate Pros with Eric J - Dream Home Financing

The Senate just voted to ban mortgage broker YSP (yield spread premiums) and stated income loans.

Once again, we have another case of politicians activating their knee jerk reactions in areas where they lack expertise. 

The argument about broker YSP is not a new one. It has been proven over and over that due to competition, the consumer does not over-pay for their cost of the loan unless they do not shop around. They can still get a lower rate with lower fees utilizing a broker than if they went to some banks directly. I can prove that in 10 minutes.

Removing the YSP will do one of two things...

1. Add origination and/or points to EVERY transaction.This would be the only way a broker can get paid.

2. Result in millions of mortgage loan officers losing their jobs.

Regardless, the borrowers will NOT be guaranteed to get better rates once the YSP is removed. Don't count on this change seeing the light of day.

 

Stated Income Loans - Oh boy !  Two years ago, salaried borrowers were excluded from participating in these programs and that was the right thing to do. If you are being paid that way, then you CAN prove it. However, there are millions of self employed borrowers out there. They are taking advantage of the tax benefits that this government has put in place for them. However, the lending guidelines are not aligned with the tax laws and prevent them from seeking the loan approvals they need. Without Stated Income Loans, the majority of the self employed individuals will NOT get the mortgage that they need. Millions of potential homeowners either stuck in their current homes or unable to buy them unless it is with cash. Any idea what this will do to the housing market? Forget those premium priced homes because mostly self employed WERE able to afford those.

Realtors, these guideline changes will have a significant impact on your business too.

Are you opposed to this?   READ MORE ...

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Rainmaker
333,624
Jenna Dixon
DRA Homes | Cobb County Real Estate - Marietta, GA
Empowers You With a Better Real Estate Experience

Eric,  I am a conspiracy theorist at heart so I don't think this is a knee jerk reaction at all.  I think this is a result of a very effective bank lobby looking to shrink the pool of mortgage options (by eliminating brokers) for borrowers so that they can hoard more profits for themselves.

May 13, 2010 02:49 AM #1
Rainmaker
394,753
Lew Corcoran, ASP®
Scena Home Staging & Decora Photography - East Bridgewater, MA
Home Stager & Real Estate Photographer

Eric - I think you're right on this one. I'm of the opinion that the powerful bank lobby is behind this effort. Mortgage brokers will be forced out of business, and banks will be free to charge even higher rates for mortgage loans due to substantially reduced competition. If the Senate proposal passes, then the consumer will actually suffer.

I also wonder about the legaility of it. Yield Spread Premium (YSP) is the same as Service Release Premums (SRP) that banks receive when they sell the loans. If YSP is banned, then so should SRP. That and in most states, broker's income is already limited by various state laws and regulations.

Loan products are offered by the lenders, not by mortgage brokers - in much the same way automobiles are made by manufacturers, not by dealers. If a car is a lemon, it's not the car dealer's fault. It's the manufacturer's fault. Here, Congress wants to blame and punish the mortgage broker for something the lenders offered, and then reward the lenders for offering bad mortgage products.

What Congress forgets is that we're also governed by what our competitors offer, and that we too must remain competitive to stay in business. We can't willy-nilly offer higher rates and/or fees and stay in business when someone doen the street can do it for less.

May 13, 2010 02:57 AM #2
Rainmaker
182,897
Eric J
Eric J - Dream Home Financing - Freehold, NJ
Dream Home Financing

Jenna,

I agree with your theory. It could very well be the banks who are trying to push the brokers out. However, I believe only the large banks such as BofA, Wells, etc.  The smaller banks NEED brokers to help generate more business. Without them, they may not survive either.

Lewis, 

I am with you too. The interesting thing is that although the rate increases as the YSP increases, a consumer can almost NEVER get OUR par rate direct from the bank without paying for it. There is the misconception that both brokers and consumers have access to the same rate sheets. There is a reason why they call it the WHOLESALE business.

May 13, 2010 03:02 AM #3
Rainmaker
1,131,701
Jane Peters
Home Jane Realty - Los Angeles, CA
Connecting you to the L.A. real estate market

The animals have taken over the farm!

May 13, 2010 02:09 PM #4
Rainmaker
594,564
Laura Giannotta
Keller Williams Realty - Atlantic Shore - Little Egg Harbor, NJ
Your Realtor Down the Shore!

I'm with Jane Peters on this one!!

May 14, 2010 03:15 AM #6
Rainer
321,367
Russel Ray, San Diego Business & Marketing Consultant & Photographer
Russel Ray - San Diego State University, CA

I'll be glad to see stated income loans go by the wayside. I have a lot of friends who were turned into liars with those loans. With your tax return and a copy of your bank statement and any other asset statements, like P&L statements, collectibles, etc., anyone, self-employed or not, should be able to prove their income.

May 27, 2010 10:26 PM #7
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Rainmaker
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Eric J

Dream Home Financing
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