I am sorry but this post is not quite accurate. We can still get paid by the lender. Just not both the lender and the borrower. And we can still get paid by the amount of the loan. Just not based on the specific program you put them in. I disagree withmuch of Frank Todd but it doesn't necessarily require the buyer to bring more cash to the table. Lenders I have are all currently coming up with numbers of how much they will pay.

Nice post, except for the part of "paying for our sins."  We haven't sinned.  There are folks in our industry who have sinned, but it's not us.  The government failed to prosecute under the rules and regulations that they implemented.  Consumer's sinned b/c they said, "hey, if you won't lend to me, then the guy down the stree will,"  etc, etc, etc.  The government is punishing those of us who haven't sinned b/c we working the same business as those who actually did sin.

Janet...  I think you hit a homerun with this one.. I would have to say that this was your best post ever... The end result, this will hurt consumers and the gov't has no business because they don't truly understand. Then again... theory... the large banks could be behind this, such as Wells Fargo and B of A, because they have call centers in which they pay those loan officers small salaries with bonuses. Let's not fool ourselves that the large banks have a hand in this and don't care what happens. Overall, there will still be huge profits from these interest rates, just that it won't be passed down to the MLO or the consumer.

@ Adam - comment # 42 - you stated this... "The only losers in this will be the mortgage people who are used to charging an individual borrower both a YSP and an Origination Fee. All others who do not practice this method of payment, it will be business as usual."

I am going to semi disagree with this...  here is the reason why... I try to have a set profit margin myself for each and every deal, trying to be the same. If I am doing a $80,000 loan and I can't make upfront and back end points, because the company needs to make money also... who do you think suffers on this? Myself and the consumer. I can't make any money if I could only charge 3 pts.. and the borrower, because many loan officers and or lenders won't do this loan. Especially if the deal is hard and would take a lot of time. It's bad enough that I see the ball dropped on semi easy deals and money was left on the table. I have closed my fair share of loans that were denied by other lenders in the last 3 years. But let's be honest.. with the cost of loans, investors being picky while loans sit on warehouse lines... costs being driven up already...  and for the fact that some loans are case by case to where I will charge less or make less at the end, because I need to reduce my costs to make a deal work.. I need to make it up in other places. it's the cost of doing business. The end result would be that the call centers win and loan officers that don't know as much, get tons of deals and if half of them close, they are still happy. Just food for thought...

Janet.. I just read your comment to Russ.... I was in the middle of mine, hence why I didn't see it... so we seem to be on the same page regarding Russ's comments pertaining to illusionary rates and that there is nothing wrong with making front and back end points. You make a good example... if I need to make 3 full points on the deal, but the borrower can only afford 1 pt upfront, I now can give a rate that pays me 2 on the back.... Something else that I should have added into my example.. and I am going to be writing about this now.. thanks for the discussion.. the gov't needs to see and read this exact post and these comments..

Jeff....it's apparent to me that Adam #42 is not in lending.  Rather, in real estate.  He skips over the entire issue of F.L.A. which is even more intrusive to our industry than Dodd Frank.  The costs to the consumer, across the board will go up.  That is a shame.  However, we were not the sinners.  He takes his eyes off of the fact that the government had safeguards in place to begin with....

BUT THE GOVERNMENT DIDN'T ENFORCE THEIR OWN REGULATIONS,

so now they go and

CREATE MORE REGULATIONS!!!!

The simple truth is that had the government enforced what they had on the books, we would not be in this situation.  Adam says that the only losers will be those who charge both origination and YSP.  It's obvious that his knowledge is limited b/c the biggest loser will be the consumer.  Especially first time home-buyers, and those with lower loan amounts.  A lot of banks will get out of the industry, but Walmart will jump in.  Need to see the forest through the trees.  My .02 cents.

@ comment #45...  the main point is that YSP will be taken away. Yes, some lenders are working on ways around this and will pay accordingly. But sorry, that was not what this post was. The main theme is the gov't stepping in and hurting rather than helping. They are a decade to late and were greedy previously.. now trying to make things right in the publics eye... but the public won't know any better until the crap hits the fan..

I have to agree with Jeff and Janet on this also. I think the losers here will be the consumers if the regulations that are supposed to go into effect on April 1 are the same ones I am reading about.

I too have a "set amount" that I like to make on a loan. It is not, by any stretch of the imagination, excessive. If the loan is tough or it looks like I may need to contribute something at closing, I may try to get a little more. If it is very cut and dry and requires little attention, I may do it for less. These rules seem to take away the ability to do that and the flexability to help my clients in this way.

Personally, I am afraid of the unintended consequences such as losing a number of our fair and professional MLOs and turning the system into one that occupies a room at the local WalMart. The clients deserve to be serviced by a fair, informed, and ethical loan originator when they are ready to make what is probably the largest financial transaction of their life. If those MLOs cannot stay in the business because of all the regulations designed to protect the consumer, who will be left to protect the consumer?

Scott

Janet, A complete home run on this post.  I can only say "ditto" to much of what you, Donne, Jeff and Larry have stated.  Bot Scott's comment (#58) brings up something a lot of people have not realized.  Effective Aprit 1st, a MLO cannot, under any circumstances contribute to the closing of the loan.  No paying for lock extensions, redraws, etc.  It seems pretty clear that the lenders are going to hedge their rates to cover possible lock expirations....or (sorry, I can't help myself...hehehhe) can we anticipate RE agents covering extensions???????  Ahhhh, the plot thickens!

@ comment # 57 the Invisible Hand - You stated this... "That being said, I believe this proposal will help the majority of buyers / borrowers who are currently underserved by an intentionally opaque and inefficient mortgage marketplace:"

Help the majority? I think it could hurt the majority on many levels... even those that have money. Why do I say this? I believe that the buyer should keep a good amount of cash in reserves. If I had a rate of 4.75% and it was costing 1 pt on a $400,000 loan, that is $4,000. If I could sell a rate of 5% that would not cost any points, that's $4,000 more in the borrower's pocket.  At the 4.75% rate, your payment would be $2,147 and at 5%, $2,086. Only a difference of $61 a month, yet they borrower gets to keep $4,000 in their pocket. Not everyone has the cash reserves after settlement.. and you might then say, well, they shouldn't be buying a $400,000 house. But what about market areas? In some areas, you might not be able to get much for $300,000 and have a growing family, etc, etc.

Secondly.. you then stated this... "If there were more participants in the borrow / buy transaction who were willing to work to optimize the overall transaction and put the fiduciary needs of the borrowers / buyers ahead of a higher profit margin this legislation would not be needed. Unfortunately the reality is that most parties involved in these deals are incented to "pay themselves first" and "buyer beware" (see comment #12 !). As this is the reality of the marketplace, I strongly believe additional legislation is warranted."

I guess you are defending our blind government... if they would have just regulated a tad more and did more due diligence about 10 years ago, we wouldn't be in this mess. They are over-reacting for a few reasons... to make the public think that they care and are doing the right thing...  for votes... and for the large banks that want more control in some areas. This will hurt all involved and will actually get worse.  Good example.. sure, their required loan officers to get licensed and take tests. But I am hearing more problems than ever before.. some of the better loan officers got out of the business. These stupid tests were based on ethics and knowledge of regulations... only about 10% of any test had to do strictly with the knowledge of mortgages, guidelines, and so much more. I get more e-mails now than I did a year ago from borrowers that are told 5 different things from 5 different loan officers on a basic easy issue or guideline.. or one that is easy to find out the right answer. Maybe this is what those tests should have focused on.

Overall.. over-regulating is going to hurt more... it's already started to happen. You agreed with comment #12.. but if you truly understand his comment, yes, the consumer has always had the ability to shop. Part of the blame needs to be on the consumer.. because this has not changed. One can still game the system as a loan officer...but what is hurting the most.. lower prices with the lack of knowledge and deals aren't closing now. Come on, think this through... not sure if you are in the mortgage business or the real estate business... but from your answer, I can only assume that you haven't worked in the trenches at all or in the last 10 years. Not here to knock your opinion or stance... but I wrote a follow up post in regards to Janet's to give examples... Thanks to the Dodd-Frank Act, I might be called the non-profit rep. - read my opening 2 examples as to why fooling with this YSP will hurt... and then my two charts to show even more reason.  thanks

Janet: Great post. One of the best I've ever read here. Sorry Jeff! Seriously, it will now cost more for the consumer to get a loan. It will also get rid of all the radio and TV advertising that was pretty effective when it came to no points and fees loans. Maybe that's a good thing. The bait and switch hurt the credibility of our business. Still, I don't think our good Senators intended to do what will now happen. Thanks again!

Janet - Frank Dodd.  Dumb and dumber. These are the morons that said there was no housing bubble in 2005.  I did a post a week ago where I gave Barney Frank the "Jackass of the decade" award for his contributions of stupidity.  They fueled the fire that caused the collapse and now they are in charge of reform.  I think Uganda has a less corrupt government than we do.

Wonderful post Janet! I hope that the "powers that be" give this some serious thought before it is actually implemented. I have heard that several organizations are arranging marches and may try to sue to stop it. We'll see what happens. It is very frustrating that those that are writing the regulations seem to have no working knowledge of how this will effect both originators and consumers and they are only worried about over-regulating to try to correct the mess that occurred years ago when they weren't paying attention!

I just saw one of the "big bank's" new compensation plan for mortgage loan originators.  Low hourly wage, small per loan incentive, etc.  Once the competent loan originators leave for greener and more reasonable pastures, that "big bank" will be left will unmotivated and unskilled order takers.  Doesn't it take the "big banks" 60-90 days to process a file already...?

Very well written post, Janet. It certainly has drawn a lot of interest.