2008-12-22 — housingwire.com
NAMB’s argument is that HUD has overlooked the rights of mortgage bankers and brokers in helping the consumer at the closing table. The lawsuit against HUD states that the Final Rule is “arbitrary and capricious,” contrary to the intent of Congress, and fails to offer any rational reasons for its rejection of alternative approaches. NAMB says the Final Rule discriminates against mortgage brokers with the required broker-only disclosure of yield spread premium (YSP), placing them at a permanent disadvantage in the marketplace.
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I have been in the industry a long time, and, it survived prior to the mortgage broker. Personally, I think this disclosure is necessary, as part of the problem with the industry was catering to the mortgage broker.
In the early nineties, it was not required to disclose the YSP, but the mortgage broker took advantage of this to charge a loan origination fee, and get a YSP fee for increasing the interest rate, and this was not explained to the borrower. They were double dipping. I was so happy when it was required... many borrowers cancelled their loans when they realized they were getting ripped off.
I am sure the majority of us "old timers" are rolling our eyes at this one. I personally feel mortgage brokers are not necessary... You can walk into any bank or apply on line, and avoid the middleman, which is all they are. If they did their job properly, I am sure some of the mess we are dealing with now would not exist.
Go HUD !!!! Permalink
KBB at 23:45 2008-12-22 said:
Brokers had a fit when this went into effect - why? Because as previously indicated, borrowers were informed of their 'double-dipping'. And these brokers now have the nerve to seek legal action? They were intending to help the customer? Prove it. This has to be a joke. It's a shame that the few
professional brokers, those with knowledge and ethics, are under the same umbrella as these idiots. Probably the same idiots who claim they are being blackballed in the industry. Permalink
Thanks KBB for the support!!!
Remember the no cost loans that the brokers used the YSP to pay the closing costs for the borrower, they churned the loans to death. Every quarter percent drop in the interest rate meant you saw the same loan.. again.. and again... and again...
That is why there are the prepayment penalty loans, to halt churning by the mortgage brokers which created another mess...
and also harmed the consumer.... not the broker... Permalink
quick questions to you Bank guys.
while you sit in your little Ivory Towers
I am a broker and you all are completely brainwashed by the Banks and the media.
If my rate quote is 4.875% today with no Points and your rate is 5.125% with No points,
Who is making more $$$?
NOT THE BROKER, THE BANKER is,. WE ALL USE THE SAME MONEY...
Banks will always make way more than any broker ever will..
I am a reputable Broker my phone rings every day with great leads and guess what REPEAT CUSTOMERS again REPEAT customers.. so I guess I am not a bad guy after all.
Remember BROKERS ARE SELLING A BANKS MONEY...I sell to Wells Fargo at a cheaper rate than if you went to a Branch Bank of Wells... Permalink
The issue here is the NAMB suing HUD over the disclosures... It is an important piece to have in place.
The amounts you are quoting are due to the secondary market .... yours is packaged and sold... You have to take into consideration of allot of other factors rather than indicating the rates etc.... You also charge processing fees etc..... The only way to really compare these two loans is guess what.... The Advanced disclosure that you guys are trying to fight.
Here's the bottom line and HUD doesn't get it. It operates like all govn't agencies (i.e. defense, HLS, welfare, etc.). They believe that reducing the "profit" on a loan lowers the cost.
Bank A has rate of 6%, fees of $1,500, profit of $1,500 (since no YSP shown).
Broker B has rate of 5.875%, fees of $1,500, profit of $2,600 (because of YSP).
HUD thinks Bank A is better option.
Also remember when you're out buying a TV for Christmas the one that cost $1,500 with profit to mfg of $200 is a better price than the one costing $1,700 since the mfg is only making $100.
Bottom line is the profit or income has NO berring on the cost to the consumer, they pay by the rate on the note. Permalink
I'm sick and tired of hearing how "banks in your ivory tower don't have to disclose".
Let's get this straight once and for all: banks receive a "service release premium" which is paid to the banks (or lenders) in return for releasing their rights to service the loan. This service is done at a profit, hence why they are paid for the rightst.
Brokers receive a YSP, which is a fee that is SUPPOSED to be there for reducing the upfront costs of the loan. The ysp is NOT for your profit. If you have a doubt, do a search for the HUD policy statement letter 66 FR 53052 from 2001.
Here are a couple of quotes from this letter:
"Yield spread premiums permit homebuyers to pay some or all of the up-front settlement costs over the life of the mortgage through a higher interest rate. Because the mortgage carries a higher interest rate, the lender is able to sell it to an investor at a higher price. In turn, the lender pays the broker an amount reflective of this price difference. The payment allows the broker to recoup the up-front costs incurred on the borrower's behalf in originating the loan
. Payments from lenders to brokers based on the rates of borrowers' loans are characterized as "indirect" fees and are referred to as yield spread premiums."
"HUD also recognizes, however, that in some cases less scrupulous brokers and lenders take advantage of the complexity of the settlement transaction and use yield spread premiums as a way to enhance the profitability of mortgage transactions without offering the borrower lower up-front fees.
In these cases, yield spread premiums serve to increase the borrower's interest rate and the broker's overall compensation, without lowering up-front cash requirements for the borrower. As set forth in this Statement of Policy, such uses of yield spread premiums may result in total compensation in excess of what is reasonably related to the total value of the origination services provided by the broker, and fail to comply with the second part of HUD's two-part test as enunciated in the 1999 Statement of Policy, and with Section 8."
I can tell you I have reviewed thousands of brokered loans and I have yet to see a file where the broker has paid for a single up-front cost. Permalink
Tell me why you think it is OK for the bank to book service release premuims as profit, but not OK for brokers?
There are THREE pieces of income on every loan (whether disclosed or not):
1) Fees charged
These are earned on ALL loans, even the banks earn YSP, that's why their wholesale rate are lower than the in house rates (so to qoute you EVERY loan done by a bank should have bank paid closing costs).
Why should brokers only be allowed to earn Fee income?
Banks are allowed to hide their SPR and YSP income because it covers their overhead, so again why can't brokers? Permalink
Mr Truth: they are brainwashed is the answer,
I would gladly sell a loan at Par,but no one seems to want to pay 1 point to get the lowest rate.....
I started out working for Old Kent Mortgage and North American Mtg.
I left the banks so I could make more money and have more flexibility for my borrowers. and 9 yrs later I am going strong... Permalink
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