WILL THE FED's NEW AND "FINAL" RULES PROTECT MORTGAGE BORROWERS?
Transparency is wonderful. However, if the document or process is more complicated than the consumer can understand, what good is it?
I love the description of the new FED rules that regulate loan originator compensation practices. Or should I say the new fed rules that do what the existing HUD rules did.
We've lived with the new GFE for some months now and know it's limitations, such as "WHAT IS MY MORTGAGE PAYMENT??"
Wait. The FED just stepped in with more new and "final rules" for the same problem, obscurity in loan originator fees. I have to chuckle when the FED makes an attempt at "clarity of rules". My recollection is that the FED has specialized in obscurity for decades. It appears that the FED practices from a position of "if the public only knew".
Ed Gillespie provides a simple explanation for some of the new/old rules that few agents and fewer consumers will understand.
Courtesy, Lenn Harley, Broker, Homefinders.com, 800-711-7988.
Well, it sounds noble enough.
"The Federal Reserve Board on Monday announced final rules to protect mortgage borrowers from unfair, abusive, or deceptive lending practices that can arise from loan originator compensation practices."
Too bad this didn't get done several years ago! But at least the announcement states that the rules apply equally to bank loan officers.
The new final rules say that a loan originator cannot be compensated through Yield Spread Premium (which is paid by the lender) based upon the interest rate or other loan terms. This is kind of amusing since, as of January 1, 2010, the new Good Faith Estimate (GFE) 2010 form gives the Yield Spread Premium amount to the borrower to use toward closing costs. I guess the Fed folks missed all of those Webinars and PowerPoints HUD prepared last year about the GFE 2010.
Originators can only get their compensation directly from the borrower. The amount is commonly based on a percentage of the loan amount. That's been on the new GFE since January 1, too. So as of April 1, 2011, when the rules go into effect, we mortgage folks will do what we have been doing since January 1, 2010!
Here's the part of the rules that those of us in the mortgage business should find downright laughable: the customer cannot be steered to a mortgage that is not in their interest just so the loan officer can make more money. We are all struggling at this point to get clients into loans that ARE right for them! Steering clients to bad loans is not even on the radar!
So what will those of us left in the mortgage business do differently when the final rules go into effect next year? Nothing. The issues were addressed by HUD in 2009.
Ed Gillespie | First Priority Financial | 916-849-9200 | www.edgillespie.instantlender.com