There are so many people anxious to know how their company will interpret the upcoming changes
that will affect EVERYONE in the mortgage community. I wanted to share what I had read from the
President of 360 Mortgage Group and then gather other peoples thoughts and opinions on the matter as
this affects all of us
New FRB Ruling Does Not Affect Brokers' Compensation - Swings Competitive Advantage to
Austin, TX, Dec. 14, 2010 - According to Mark Greco, President of 360 Mortgage Group, the new FRB Rule creates transparency for the educcated borrower to fairly compare the true characteristic of a loan, regardless of whether the loan is being made by a mortgage broker or a mortgage banker. This rule will not have a negative impact on a broker's ability to earn the same income as they have since the latest RESPA change. Brokers have been able to charge origination fees and give YSP in the form of a credit to borrowers. That is not going to change. The rule simply extends the RESPA changes beyond the broker world into the banker world, and will now require bankers to play by the same rule es as brokers.
He states that the recently enacted Fedderal Reserve Board (FRB) Rule, due to go into effect on April 1, 2011, will give the competitive advantage that mortgage bankers have enjoyed for years back to mortgage brokers. Recently, there has been a mass exodus from the mortgage broker world, with loan officers fleeing to mortgage banks due to the fear of losing their ability to earn Yieldd Spread Premium (YSP). As the FRB Rule goes into effect, brokers' fears have subsided, while mortgage bankers have begun to get anxious.
"Many have interpreted the FRB Rule to say that it will limit the brokers' compensation and that it will remove YSP from brokers' compensation. This is a significant misconception," Grecco states. "In fact, the RESPA change that went into effect on January 1 of this year effectively changed the disclosure of YSP from being paid directly to the broker. Since January, all YSP has been given to borrowers in the form of borrower credits which the broker has the ability to capture. The FRB Rule simply states that the loan originator cannot be compensated based on the rate or the terms of the note; however, borrower credits may be based on these two aspects of the loan."
It is the opinion of 360 Mortgage that this rule will have a much greater impact on a mortgage banker's compensation and little to no impact o on the broker. When the initial rule first was published, it was not inclusive of mortgage bankers and depository institutions. Since then, there have been revisions, which are very specific to include mortgage bankers and those originators who work for banks or depository institutions.
Greco explains: "Many mortgage bankers are concerned, and some are fleeing the inndustry. I know a loan officer that originates for a Houston-based retail mortgage bank and he has decided that he will likely seek employment in a different profession altogether. The mortgage bank he works for has told him that they are going to restructure their compensation plan, and the new commission plan is going to pay
between $600 and $800 per closed loan. This commission structure will cut a typical loan officer's compensation by more than 50 percent, in most cases. This is not the case for mortgage brokers. Brokers will be able to maintain the same level of revenue on each loan that they have today."
Another advantage mortgage brokers will enjoy is the ability to give credits to the borrower, which, if presented properly, could mean fewer funds to close for the borrower. In most cases, mortgage bankers will choose not to give borrower credits. This quite possibly will create a competitive disadvantage for the retail mortgage banker. Yet, the biggest benefit for a broker remains, as it always has been, with the
number of options they have available for their clients. While a mortgage banker typically has one set of rates and products to offer a customer, a broker has access to many different lenders, all with different solutions for every borrower. Ultimately, brokers have the ability to shop their investors for the best rate and term for their customers and their business. Now, with the new FRB Rule, brokkers will find
themselves comfortably in the driver's seat as mortgage bankers struggle to adapt to the changing landscape of the mortgage lending industry.
I want to hear from Bankers and Brokers what your thoughts are
Subscribe to CommentsComment