By now you will have heard a few gripes from your mortgage professionals about the recent fun of changing systems to meet our new 'Federal Loan Officer Compensation Rule guidelines'. If any of your colleagues asked for your help to speak up to congress I hope you did. For those willing to put head in sand you can now put foot on behind. We will all be feeling the effects of higher rates on our mutual clients. It's just that simple.
While the 'Fed Fight' is officially over as far as the appellate courts go, there is still life left in our organizations NHIAP and NAMP. Challenges are now being directed to the new Consumer Protection Agency director, Elizabeth Warren to point out the devastating effect of fixed origination fees to consumers not to mention that the big banks are escaping this particular scrutiny machine as usual.
What do I have to complain about? Our new fixed Loan Officer Compensation just rolled plan sounds pretty good if you have been slicing and dicing your fees like most of us just to keep our customers happy since the Wall Street Meltdown. My actual origination fee will go up across the board. Only now I can't help my clients with an appraisal fee or lock extension. In fact I get paid the same whether I do a good or bad job. How's that for incentive?
What's the true cost of this new rule?
Mortgage professionals argue that the new Federal LO Compensation Rule will raise interest rates and transaction costs to consumers. Further, many mortgage banks will be put out of business by creating higher costs of operation and oversight. What if only five banks are left offering mortgages?
Ask yourself: Is letting big conglomerates run things really all that great an idea for local interests?
If you loved the Wall Street Meltdown prepare for the Wall Street Lockup! Loan products, underwriting guidelines and rates will be controlled by handful of people who, by the way, also run our Federal Reserve. Those same banks that own or are owned by the architects of the credit derivative game. If you've seen the movie: "Inside Job" it's hard to miss the sickening fact that de-regulation from former eras backfired big time. Enter knee-jerk regulation- not the answer. But that's exactly the answer we got on Tuesday.
Good news for loan officers!
I'm pretty sure this 'good news' for loan officers won't be appreciated by our clients when they see the new rate sheet. Passing on regulatory costs is a fact of life in our industry. My only beef is that these regulations are focused on non bank financing and our colleagues at the big banks are immune. I'll miss the ability to assist clients.
How will this new rule affect your borrower?
On larger loans your borrower will pay a higher fee because we have to set one percentage for all loans regardless of size. Formerly if your loan involved more effort for the size of the transaction, I could set my fee to make it worth my time to do a decent job.
Previously, a larger loan amount allowed me to lower the feeI charged. No more. One set fee (percentage of the loan amount) suggests that loans under about $150,000 will be hard to justify for the effort takes to close that loan. So, lower priced loans may be denied. In contrast, larger loan amounts will be charged higher fees than normal and will return loan originators a higher fixed fee. This will no doubt anger the borrower who has to pay it! According to the new Rule, I can't do anything to help take away this sting! If you don't want to pay my fee yourself, then the lender will pay me according to a set rate structure on the day. Your rate will be higher and I will not be able to price it competitively (like I do now) to help your borrower get better terms. I can 't use any of my commission to kick in toward costs. Not one dime!
What about consumer protection?
I predict if you are seeking a loan under $150,000 you can expect very few options, thanks to this Fed rule. Bankers will skew their target base to higher loans for higher commissions. The 'anti steering' idea of this bill was to protect consumers from allowing us to steer you to a higher priced loan. The horse left that barn a few years ago. No banker or broker worth their salt would allow that kind of thing today at risk of losing their license. We do have this little law called Fair Lending. If only the exiting laws were enforced uniformly between both banks, brokers and the big guys?
Was limiting choices of lower priced home buyers the intent of the rule? Officially, this rule was devised to protect consumers but in reality everyone will pay more. Irony of ironies: the much maligned 'ysp' or yield service premiumn, (our margin formerly used to pay down costs or pay your your broker/banker) was returned to your borrower via the 2010 GFE. It's now going back into your bank's pocket. Sweet for them!
Our task now is to pick up our smiles and get on with doing a better job than our competitors. Fortunately, better service is the easy part!
All the best! loannetter