mortgage brokers fight for yield spread premium

StephenF at 00:36 2011-03-13 said:

I don't know about other Brokers on this board, but I haven't received YSP since late 2009. The entire example in the article comparing the 4.75% rate & the 5.25% rate simply to make more money is ridiculous. Whoever wrote this article has obviously not worked with the GFE2010. This article misses the mark IMO. Permalink

kindandgentlejd at 00:48 2011-03-13 said:

I have always been of the opinion that mortgage brokers (mainly California) has breached their fiduciary duties to their clients related to ysp and received secret profits in violation of the real estate law. When a mortgage broker, acting under their broker/agent license, has an obligation to disclose all of their compensation up front and their client must agree to it. If the compensation changes, they need their clients consent. The argument that it is paid by the lender is ridiculous, it is paid by the borrower in the form of a higher interest rate. I have seen many times mortgage brokers tell a consumer that they broker fee is what they are charging the borrower and the ysp is being paid to them by the lender. This "abuse" has led to the current trend of banning ysp to mortgage brokers all together. This is their own doing. Permalink

buyerbeware at 00:50 2011-03-13 said:

I don't know about other Brokers on this board, but I haven't received YSP since late 2009. The entire example in the article comparing the 4.75% rate & the 5.25% rate simply to make more money is ridiculous. Whoever wrote this article has obviously not worked with the GFE2010. This article misses the mark IMO.

Exactly! Permalink

achtung at 03:31 2011-03-13 said:

I have always been of the opinion that mortgage brokers (mainly California) has breached their fiduciary duties to their clients related to ysp and received secret profits in violation of the real estate law. When a mortgage broker, acting under their broker/agent license, has an obligation to disclose all of their compensation up front and their client must agree to it. If the compensation changes, they need their clients consent. The argument that it is paid by the lender is ridiculous, it is paid by the borrower in the form of a higher interest rate. I have seen many times mortgage brokers tell a consumer that they broker fee is what they are charging the borrower and the ysp is being paid to them by the lender. This "abuse" has led to the current trend of banning ysp to mortgage brokers all together. This is their own doing.

Secret profit?

As a broker/banker we have been required to post YSP as a dollar amount and as a percentage of the loan for years before the meltdown.

It was always disclosed. Fees always needed to be consistent from start to finish on every loan. When changes were made, the borrower always needed to be informed. Talk to any broker who was actually audited in the last 15 years, and they will tell you what happens when you are not putting YSP on the GFE ... or maybe they won't because they were probably put out of business.

Do some get away with breaking the rules, yes ... but the rules are in place, and it is an enforcement issue, not an abuse issue. Permalink

kindandgentlejd at 11:53 2011-03-13 said:

I have always been of the opinion that mortgage brokers (mainly California) has breached their fiduciary duties to their clients related to ysp and received secret profits in violation of the real estate law. When a mortgage broker, acting under their broker/agent license, has an obligation to disclose all of their compensation up front and their client must agree to it. If the compensation changes, they need their clients consent. The argument that it is paid by the lender is ridiculous, it is paid by the borrower in the form of a higher interest rate. I have seen many times mortgage brokers tell a consumer that they broker fee is what they are charging the borrower and the ysp is being paid to them by the lender. This "abuse" has led to the current trend of banning ysp to mortgage brokers all together. This is their own doing.

Secret profit?

As a broker/banker we have been required to post YSP as a dollar amount and as a percentage of the loan for years before the meltdown.

It was always disclosed. Fees always needed to be consistent from start to finish on every loan. When changes were made, the borrower always needed to be informed. Talk to any broker who was actually audited in the last 15 years, and they will tell you what happens when you are not putting YSP on the GFE ... or maybe they won't because they were probably put out of business.

Do some get away with breaking the rules, yes ... but the rules are in place, and it is an enforcement issue, not an abuse issue.

Prior to my current position at the law firm, I was the national compliance manager for a national bank. I have seen routinely initial GFE's that list on the GFE the YSP as a range or as paid by lender. This is a substantial mis-disclosure of the compensation paid by the borrower as based on case law is considered a secret profit based on how it is disclosed. A fiduciary must disclose the compensation clearly to his client and attempting to mislead that the ysp is paid by the lender has been and will always be a misrepresentation. If you were to sitting in front of your client and told them that my loan broker fee plus my ysp equals x amount of dollars and that is what YOU are paying me to arrange this loan, that would be full disclosure. Permalink

achtung at 13:57 2011-03-13 said:

I have always been of the opinion that mortgage brokers (mainly California) has breached their fiduciary duties to their clients related to ysp and received secret profits in violation of the real estate law. When a mortgage broker, acting under their broker/agent license, has an obligation to disclose all of their compensation up front and their client must agree to it. If the compensation changes, they need their clients consent. The argument that it is paid by the lender is ridiculous, it is paid by the borrower in the form of a higher interest rate. I have seen many times mortgage brokers tell a consumer that they broker fee is what they are charging the borrower and the ysp is being paid to them by the lender. This "abuse" has led to the current trend of banning ysp to mortgage brokers all together. This is their own doing.

Secret profit?

As a broker/banker we have been required to post YSP as a dollar amount and as a percentage of the loan for years before the meltdown.

It was always disclosed. Fees always needed to be consistent from start to finish on every loan. When changes were made, the borrower always needed to be informed. Talk to any broker who was actually audited in the last 15 years, and they will tell you what happens when you are not putting YSP on the GFE ... or maybe they won't because they were probably put out of business.

Do some get away with breaking the rules, yes ... but the rules are in place, and it is an enforcement issue, not an abuse issue.

Prior to my current position at the law firm, I was the national compliance manager for a national bank. I have seen routinely initial GFE's that list on the GFE the YSP as a range or as paid by lender. This is a substantial mis-disclosure of the compensation paid by the borrower as based on case law is considered a secret profit based on how it is disclosed. A fiduciary must disclose the compensation clearly to his client and attempting to mislead that the ysp is paid by the lender has been and will always be a misrepresentation. If you were to sitting in front of your client and told them that my loan broker fee plus my ysp equals x amount of dollars and that is what YOU are paying me to arrange this loan, that would be full disclosure.

If you were the "National Compliance Manager" and you saw originators not complying with RESPA, then you should have reported them.

If you were at any closings, you would have had the title agent go through the numbers and explain the YSP again to the consumer. Those of us who cared about going to closings and getting referrals from happy consumers, would not risk lying to a borrower about YSP.

Mortgage Broker Contracts have existed since 1999 HUD clarification and affirmation of the legality of YSP. Mortgage Broker Contracts specifically explain the compensation both front and YSP to the borrower. This information is Supposed to be identical to the GFE and the HUD closing statement. http://www.hud.gov/offices/hsg/rmra/res/mbcontr.pdf

I still maintain, that if properly disclosed and properly enforced, there was no legal impediment to YSP. I am not saying that rules were not broken by the bad apples of the industry. Those who broke the rules needed to be disciplined, which is an enforcement action.[/url] Permalink

BIGTXLENDER at 23:20 2011-03-13 said:

what a joke of article is right!!!!!!!!!!!!!

I want to see proof that charging a borrower .25 to .50 higher in rate lead to foreclosure?? find me one example please!!

so if this article is right, I do a loan at 200k, i charge .25 more in rate to get about 1 to 1.5 in YSP, so $$32 a month more in payment is going to put this loan in peril?? I think NOT!!!!!!!!!!!! Permalink