Transparency Talks are Back

18 Dec

Posted by Chris Beauchamp as Mortgage

“U.S. Federal Reserve Chairman Ben Bernanke said Friday that the Fed will consider whether consumers need more information on how mortgage brokers are paid as part of its efforts to improve transparency in the mortgage industry.”

Any brokers out there have an opinion on this?

15 Responses

sharon

December 19th, 2007 at 2:36 am
1

Other businesses are not required to disclose their profit margin,why should the brokers have to reveal their profit margin!
laurie ryan

December 19th, 2007 at 2:40 am
2

Here is what I think, If the secondary market monies were still available to consumers would we really have a problem? Of course there would be some forclosures but I’ve run across so many clients that want to pay their mortgage and are aren’t incuring any prepayment penalities. The problem is declining values, and loans that they once qualified for they don’t….do to the guideline revisions….

All the banks, big…small….brokers, direct lenders….builders…. where all doing the same loans, how else where all of these people going to afford these houses? I will admit there were some less than honest people doing business in the last several years, but that doesn’t account for what’s going on in the market.

Merrry Christmas:)
S. Norris

December 19th, 2007 at 2:49 am
3

All my info is disclosed on my good faith estimate unlike car dealers or others in sales and marketing. Typically a undisclosed percentage or commission is paid all the way up and down the sales arena. Seriously, when is the last time a borrower knew how much the bank was making on a transaction?
Craig Markhardt, CRMS

December 19th, 2007 at 6:25 am
4

In your comment about Countrywide being a part of a witch hunt I was smiling and agreeing. When I got to the issue on transparancy, I also smiled, frowned and realized that brokers are also part of a witch hunt. Everyone in our industry knows that Banks receive Yield in the form of Service Release Premium, identical to Yield Spread Premium the broker receives, but just not shown on the final settlement statement. My though it that if YSP is eliminated, then I will be fighting for Banks’ SRP to be eliminated as well, and it will come next once the Press, Congressmen, Senators, and the Public is informed.

Americans are not new to capitalism and understand it takes profit to make businesses operate. I have yet to hear one public outcry from all the PR that this YSP issue has stirred up, I have only heard fear of the government attempting to movein and push our capitalist society toward the socialist side of the spectrum with this effort.

The blogs will light up one day if YSP is eliminated, because it will be the start of the change in our US society, and then many industries will be concerned, including Realtors, Insurors, Investment Advisors, Auto Lenders, Pharmaceutical Companies, and on and on.

- An ethical, educated Mortgage Broker making an honest living
tom

December 19th, 2007 at 10:53 am
5

Very simply… the 1003 needs to be a standardized form… no add ons… no line left empty… 2. what the broker gets front end AND back end must be disclosed to borrower.. I recently got a loan through by apples to apples comparison.. briefly the other lender had no points but adding things up charged 1300 more is add on fees than my company. Get this, they waived any application fee (typically 300 plus or minus) but charged a special second processing fee of 600.

Most borrowers dont have the experience to understand all the line items and just eventually trust one broker or another based on the selling skills of the broker not his/her intergity.

Finally there should be a pamphlet explaining good questions to ask a broker before choosing one, like… in total how much will your company get…and tell the borrower that 2 points is not excessive either… brokers have to earn a living as well…

appreciate your newses…thanks
Alex

December 19th, 2007 at 1:29 pm
6

We are in an election year so someone must pay for this mess that we are in…regardless if they are guilty or innocent. Countrywide has been in play for a while now so I am not surprised…as far as the Bush plan; How much more information can we give them??? The last time I checked the amount of disclosures is overwhelming….such as; ARM riders, GFE, TIL, Standard Disclosures, Stated Income rider, etc, etc…I do feel that the witch hunt will begin and the hunted will be the brokers…With regard to loss of jobs in the industry,keep in mind I don’t know what the exact number is but I’m sure that we originated at least a trillion less in 07 then we did 06 they should cut by 50% and they should start with the imbecilic loan officers, most of them are semi-literate anyway…Looking forward to a brighter 2008…
Joe R.

December 19th, 2007 at 1:44 pm
7

Transparency? The joke is the secondary market needed to be more transparent. The back room deals made with lenders during the housing boom left us in the shambles we are feeling today.

Why is it that brokers are the scape-goats of the Fed. We already disclose YSP and discount points charged along with origination fees on GFE’s. What more disclosure regarding a broker’s income does the consumer need? Those who hide behind the lender moniker in order to non-disclose their fees, won’t feel discriminated against.

No doubt, there have been many abuses by brokers and lenders alike. But it was the greed of the financial investors that stoked this fire. It goes to prove the validity of the old adage, “be careful what you wish for”.
Joe

December 19th, 2007 at 1:54 pm
8

A few thoughts - Reply #1 from Sharon said it all - “Other businesses are not required to disclose their profit margin,why should the brokers have to reveal their profit margin!” - should be the end of the discussion. A simple question: is the fact that borrowers don’t know how much a mortgage broker makes on a deal the cause of the problem? (Only politicians can take a mess and make it messier…)

btw - Sharon - get some sleep!
Q

December 19th, 2007 at 1:58 pm
9

You have got to be kidding me! Blame the broker? Last time I checked the builders and the appraisers set the market. Sure some brokers were unscroupulous in there practice, and as a honest broker I will accept that. Lets cut to the chase, the only way to truely help people would be to increase loan to values to over 100% and give needy people a good interest rate, because with the builders and the appraisers setting the market with basically a sell off of houses, people can’t get out of there ARM. The Fed can cut interest rates to the floor, but it does not mean a thing if the value is not there. Lets really help people.
Rich

December 19th, 2007 at 2:09 pm
10

I feel that it is our job to educated our clients so that they can make an apples to apples comparison. I feel that the banks should have to disclose SRP and I always compare my pricing to Bank of Amer. when I go to a branch to do my banking. They are typically about .375% and 1 point higher then what I can offer from the broker side. How will that help the consumer?

We as an industry are responsible for a large portion of this mess. How many of us did a stated deal for a w-2 borrower? We have to police ourselves and get the scum out of our industry. Large or small, its the integrity and ethics of the LO that determines how a client views their transaction and whether they are put into the BEST program for them, regardless of income for the LO.

The market will determine what is a “fair” fee, as it does in every industry.
MA SC

December 19th, 2007 at 2:48 pm
11

The idea of “Transparency” is a good one, BUT in my opinion has nothing to do with how a broker gets paid.

The two (2) major things that have caused the problem we have today.

1. The market allowed itself to get out of hand with mortgage products we as an industry KNEW the borrower would have a hard time paying back over time. And yet a good percentage of brokers and lenders continued to sell the products to make a profit and wall street kept eating it up to keep the liquidity there.
There was an article that stated that Sub-Prime ARM loans made up less than 7% of the countries mortgage loans, but accounts for over 43% of the countries foreclosures. The traditional Sub-Prime products are performing as expected.
RESULT: Now as an industry the liquidity in ALL Sub-Prime loans has pretty much dried up. Agency paper is getting tighter and more costly to the borrower. As of this morning Mortgage Implode has 205 major lenders either closed down or getting out of the business. And it has one of the major causes of the housing market slump.

2. We have not policed ourselves enough which has opened the door for the government to step in.
Be it fruad or unlicensed loan officers. The industry has turned it’s head and looked the other way.
FRAUD.
Many wholesale lenders find blatant fraud in a loan and either slap the company involved on the wrist or “cut them off” from doing business with them as a wholesaler. In most cases, even the offending company does nothing to the Loan Officer/Originator that committed the fraud. So they just move on to the next wholesaler and keep on with business as usual. That is why when you read an article about someone milking the industry for MILLIONS and you think “how did they get away with it for so long?”, this is your answer. Why didn’t the wholesalers not file charges, make a stink, get at least the LO out of the business. FEAR. Fear that when they reviewed all the loans they purchased from this specific lender they would find more fraud. Then they would have to inform the current holder of the note and be held responsible.
UNLICENSED LO’s.
I can’t tell you how many times I run across brokers/lenders that allow Loan Officer/Originators to work even though they can NOT get licensed by the state. They just put another licensed LO’s name on the loan. I have seen companies with several branches, unlicensed, filled with unlicensed LO’s. I have even seen where a member of management charges cash to put his name on the 1003 as the licenses originator.

So, as far as the need for “Transparency”, we have brought it on ourselves as an industry. But again, it has little to do with what a broker gets paid.
Kevin Gray

December 19th, 2007 at 6:10 pm
12

Transparency? I thought we already have transparency? Adding more disclosures and confusion to the lending process will not help anyone. In Colorado we have a new Broker Fee disclosure. This form actually has a box that you can check that says “I am paid by a salary or other method that is not affected directly by your loan’s interest rate and fees.” Does anyone really believe that a companies payroll and overhead will not effect the rates and fees they charge? Putting the Mortgage Broker at a competitive disadvantage will only serve to lessen the competition and raise the costs for the consumers. Once again, good intentions make bad policy.
elizabeth

December 19th, 2007 at 9:25 pm
13

I think all mortgage brokers should strike for 1 year…just simply stop making any loans…let’s see if the banks can blame anyone then and see if it that “fixes” all the problems the poor greedy simpleminded public seems to have with taking loans against their property in excess of what they can pay and in excess of what they know it’s worth. Our problem if anything has been the rampant greed of the market and everyone “shopping” for loans and only hearing what they want to hear and then playing dummy up.
George Bruyynell

December 19th, 2007 at 10:16 pm
14

Putting the blame on the mortgage broker has always been easy. Thelast time I looked Ameriquest Mortgage was a Banker. As we all know they were one of the major companies that wrote and closed these type of loans. I know I was a manager for them in the state of DE for about a year untill I could not take to abuse of the people any more…..
Michelle

December 20th, 2007 at 7:04 pm
15

Everyone can make all the excuses they want but what it comes down to is “DOING THE RIGHT THING”! There are problems because a lot of brokers or Mortgage Companies have made it ok to cut corners. They or we have encouraged them to do this. You may be a “They” or “We”, but all of us have witnessed this behavior at one time or another. It may not have been said but definitively implied by do as I do to make your numbers. So the question I have when this behavior has gone on have any of you called a broker or the mortgage company out. My guess is at least 80% of us have not because there would not be the mess we have today. I say lets get back to basics. Learn how to clean up the industry and the bad rap we have now. First, start with how to do business the right way. I have found a guy, Bill Rice of Kaleidico who has taken the 1st step. He has put a white paper out on Lead critic for free for us to start improving the mortgage industry, first with ourselves. Here is the link and it appears this will be a continuing update to the White Paper weekly. Lets stop complaining and try to “Do the Right Thing”! This is awesome to have something at our finger tips for free. http://blog.leadcritic.com/wp-content/uploads/2007/12/internet_originations_overview.pdf