Yet Another Late and Useless Government Final Rule.

Reblogger Lenn Harley
Real Estate Agent with Lenn Harley,, MD & VA Homes and Real Estate 303829;0225082372



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,, 800-711-7988.



Original content by Ed Gillespie NMLS 244226

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 |




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Lenn Harley
Lenn Harley,, MD & VA Homes and Real Estate - Leesburg, VA
Real Estate Broker - Virginia & Maryland


Or, Congress could stop making new law.  Enforce the existing ones would usually have been enough.  The Departments and the FED must write new regs each and every time Congress tinkers.

Aug 19, 2010 12:20 AM #4
Jay Markanich
Jay Markanich Real Estate Inspections, LLC - Bristow, VA
Home Inspector - servicing all Northern Virginia

Each one of these "new" rules is another brick on the bundle they have placed on my back.  It's getting too heavy to carry.

Aug 19, 2010 12:36 AM #5
Keith Sellers
Sellers Real Estate - Kalamazoo, MI
Greater Kalamazoo and Lakeshore

I'm sure my buyers are feeling more protected already!

And I'm starting to get a clue on AR, Lenn, by subscribing to your blog from Deb Garvin's great feature post!


Aug 19, 2010 12:41 AM #6
Robert Vegas Bob Swetz
Las Vegas, NV

Hello Lenn and I also think this country has to many rules, laws, etc.

Can't we just go back in time, keep it simple and to the point? These Attorneys get there hands in all our business so it's very difficult to do anything without having their crook claws squeezing money from us!

VB ;-)

Aug 19, 2010 01:00 AM #7
Lenn Harley
Lenn Harley,, MD & VA Homes and Real Estate - Leesburg, VA
Real Estate Broker - Virginia & Maryland

Jay.  For everyone, lenders, agents, inspectors, appraisers, everyone.

Keith.  HA!  I'm sure your buyers are on top of all the changes and feel just wonderful.

Robert.  In this case, I believe it's a quasi-government entity making busy to justify their existance.

Aug 19, 2010 01:04 AM #8
Charlie Ragonesi - Big Canoe, GA
Homes - Big Canoe, Jasper, North Georgia Pros

Thre are so many people who understand this so well. Why aren't they being asked. Thisis not complicated stuff. This is why I think washington gets us frustrated

Aug 19, 2010 01:55 AM #9
Evelyn Johnston
Friends & Neighbors Real Estate - Elkhart, IN
The People You Know, Like and Trust!

And yet isn't this still the best country to live in? America is great, and voting citizens need to be responsible in researching and voting in the politicians they stand behind.

Aug 19, 2010 01:57 AM #10
Rob Arnold
Sand Dollar Realty Group, Inc. - Altamonte Springs, FL
Metro Orlando Full Service - Investor Friendly & F

I read on Think Big Work Small that closing costs are up over 30% on financing deals since 2009.  That seems like a staggering number to me and I'm guessing it is being caused directly by all the new law changes.

Aug 19, 2010 02:18 AM #11
Scott Hayes
(512) 786-8300 - Austin, TX
Realty Austin, Broker Associate


Funny you mention the new GFE. A mortgage broker simply said a few weeks ago *the new GFE sucks*

Aug 19, 2010 03:08 AM #12
Markita Woods NMLS#196099
Fairway Independent Mortgage - Woodbridge, VA
Queen of Mortgages - FHA, VA, Conventional, USDA

Good Morning!

It appears that the FED practices from a position of "if the public only knew".

So true...

Aug 19, 2010 03:12 AM #13
Paul S. Henderson, REALTOR®, CRS
Tacoma, WA
South Puget Sound Washington Agent/Broker!

Its a shame that most of these new rules are targeted to a very select group or not to work at all.
What a great day to be alive Lenn!

Aug 19, 2010 04:13 AM #14
Jayson Bates Loan Officer/Arizona
GMAC Mortgage - Scottsdale, AZ

I am new at active rain so this is my 1st response. I couldn't agree more with some of these responses. The new GFE is confusing for the buyer or homeowner. With having to be politically correct and redefining the "Origination Fee" it has confused buyers even more. I also saw that cost have gone up 30%. It never gets cheaper when the government gets involved. I am hearing the the HVCC ruling will be going away next month. If so then maybe the cost for appraisals will come down. That would be a bit of good news. The change on compensation to loan officers will have a deep impact on the business. I know of quite a few colleagues that will be getting out of the business which will mean the few that are left may charge even higher fees. I hope that doesn't happen.



Aug 19, 2010 08:43 AM #15
George Souto
George Souto NMLS #65149 FHA, CHFA, VA Mortgages - Middletown, CT
Your Connecticut Mortgage Expert

Lenn, I fail to see how this is going to make anything better, it is another useless regulation.

Aug 19, 2010 02:48 PM #16
Jim Crawford
Maximum One Executive REALTORS® - Atlanta, GA
Jim Crawford Atlanta Best Listing Agents & REALTOR

Governments are not about transparancy at all.  It would cease to exist if we only knew...

Aug 20, 2010 01:59 AM #17
Dan Quinn
The Eric Steart Group of Long & Foster Real Estate - Silver Spring, MD
Dan Quinn

I love how Ed said what would he "do differently when the final rules go into effect next year?" 


Aug 20, 2010 02:55 AM #18
Barbara-Jo Roberts Berberi, MA, PSA, TRC - Greater Clearwater Florida Residential Real Estate Professional
Charles Rutenberg Realty - Clearwater, FL
Palm Harbor, Dunedin, Clearwater, Safety Harbor

Lenn - you have to love how they spend our tax dollars to make more and more rules to follow!

Aug 20, 2010 03:14 AM #19
David Krushinsky
Dk Home Loans, LLC - Peoria, AZ
AZ MB-0949619 MLO NMLS #202115

I think Ed's assessment of the new Fed rule misses a few items.  It's not just another case of the GFE being reiterated.  Here are some of the highlights from the new rule change:

  • Prohibit payments to the loan originator that are based on the loan's interest rate or other terms. Compensation that is based on a fixed percentage of the loan amount is permitted.
  • Prohibit a mortgage broker or loan officer from receiving payments directly from a consumer while also receiving compensation from the creditor or another person.
  • Prohibit a mortgage broker or loan officer from "steering" a consumer to a lender offering less favorable terms in order to increase the broker's or loan officer's compensation.

Provide a safe harbor to facilitate compliance with the anti-steering rule. The safe harbor is met if:

  • The consumer is presented with loan offers for each type of transaction in which the consumer expresses an interest (that is, a fixed rate loan, adjustable rate loan, or a reverse mortgage); and
  • The loan options presented to the consumer include the following:
  1. the lowest interest rate for which the consumer qualifies;
  2. the lowest points and origination fees, and
  3. the lowest rate for which the consumer qualifies for a loan with no risky features, such as a prepayment penalty, negative amortization, or a balloon payment in the first seven years.

I did a blog about it the other day.

Aug 20, 2010 08:55 AM #20
Jon Zolsky, Daytona Beach, FL
Daytona Condo Realty, 386-405-4408 - Daytona Beach, FL
Buy Daytona condos for heavenly good prices


it is always amusing to watch the Feds to create rules to avoid the mess that they themselves initiated.

Aug 20, 2010 04:16 PM #21
Lenn Harley
Lenn Harley,, MD & VA Homes and Real Estate - Leesburg, VA
Real Estate Broker - Virginia & Maryland

David.  Interesting.  It would appear that these rules would require something akin to "FIDUCIARY".

Charlie.  They need something to do.

Evelyn.  At least.

Rob.  The more regulation with which any business has to comply will drive up costs.  That's just fundamental.

Scott.  Who can disagree with that?

Markita.  Indeed.  Fact is, the public doesn't know and they rely on that fact.

Paul.  The alternative is not very attractive.

Jayson.  Welcome.  Sorry, fees (appraisal) never come down.

George.  It will contribute nothing, nada, zip.

Jim.  It would cease to exist if more knew.  Those of us who do know are too few to make a difference.

Dan.  Agreed.

Barbara-Jo.  They have substituted meddling for governing.

David.  Thanks.

Jon.  That's an apt description.













Aug 20, 2010 11:09 PM #22
Ed Gillespie
WealthWise Mortgage Planning, a Division of American Pacific Mortgage Corporation NMLS #1850 - Folsom, CA

David K.--From my perspective, correctly and fully using the new GFE addresses the points you mentioned from the Final Rule, which is why i didn't include them.

The broker's/banker's fee is based on a percentage of the loan amount (or a flat fee) so not affected by the loan terms the borrower selects.  Originators won't benefit from steering a client to a different loan product or giving them risky or unfavorable terms. 

Aug 28, 2010 07:13 PM #23
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