Archive for Mortgage Industry News

The CFPB Introduces New Mortgage Loan Originator Compensation Requirements under the Truth in Lending Act

By · March 12, 2013 · Filed in Mortgage Industry News · Comments Off

President Obama put in place the Consumer Finance Protection Bureau in an effort to protect American consumers in respect to loans, mortgages and finance related activity. The CFPB has made recent adjustments to loan originator’s compensation. Like it or not, there are new laws rolling out that will have a significant impact on the entire mortgage lending industry.

The CFPB  amended Regulation Z to implement amendments to the Truth in Lending Act made by the Dodd-Frank Act. The final rule implements requirements and restrictions imposed by the Dodd-Frank Act concerning loan officer compensation; qualifications of, and registration or licensing of loan originators; compliance procedures for depository institutions; mandatory arbitration; and the financing of single-premium credit insurance. The final rule revises or provides additional commentary on Regulation Z’s restrictions on loan originator compensation, including application of these restrictions to prohibitions on dual compensation and compensation based on a term of a transaction or a proxy for a term of a transaction, and to record-keeping requirements. The final rule also establishes tests for when loan officers can be compensated through certain profits-based compensation arrangements. At this time, the CFPB is not prohibiting payments to and receipt of payments by loan officers when a consumer pays upfront points or fees in the mortgage transaction. Instead the Bureau will first study how points and fees function in the market and the impact of this and other mortgage-related rule-makings on consumers’ understanding of and choices with respect to points and fees. This CFPB final rule is designed  to protect consumers by reducing incentives for loan originators to steer consumers into loans with particular terms and by ensuring that loan originators are adequately qualified.

1. The CFPB Rule

a. Effective dates

b. Breakdown of the document’s contents

2. Detailed summary of the rule

 3. Related proposals

 

The Rule and Effective dates

The amendments to § 1026.36(h) and (i) are effective on June 1, 2013. All other provisions of the rule are effective on January 10, 2014. If you have question, contact CFPB about interpretation or application by email at CFPB_reginquiries@cfpb.gov or call (202) 435-7700.  Read more about New Rules on Loan Officer Compensation Under TIL and Regulation Z.

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New Loan Compensation Rules

By · January 24, 2011 · Filed in Mortgage Industry News · 1 Comment »

New loan compensation rules issued by the Federal Reserve Board under the Truth in Lending Act go into effect April 1, 2011.  Effective April Fool’s Day, all mortgage lenders and loan originators are subject to the new rules. Many loan professionals are unhappy about the Dodd-Frank mortgage reform bill.

Overview- The new lending rules prohibit a loan originator from the following:

  • Receiving compensation based on the interest rate or loan terms other than loan amount.
  • Increasing their compensation by raising the consumers’ loan costs – for example by increasing the interest rate.
  • Directing or “steering” a consumer to accept a mortgage loan not in the consumer’s best interest in order to increase the compensation.

These new loan compensation rules allow a loan originator to:

  • Receive payment from the consumer or the lender, but not both.
  • Receive compensation based on a percentage of the loan amount and volume.

Broker Compensation

An overview of how the compensation rules relate to brokers: Broker compensation can be paid as a percentage of the principal mortgage loan with minimum and maximum dollar thresholds. Broker Loan Officer (LO) compensation can vary by LO provided that the compensation model is the same for every transaction originated by that LO. Broker compensation can vary based on geography to allow for differences in the costs of loan origination, such as rent and other overhead expenses. Compensation models can change due to market conditions. The prohibition of paying compensation to loan originator based on loan terms and conditions does not apply to payments that the customer makes directly to a loan originator.

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Fed Bans Lenders from Paying Yield Spread Premium to Brokers

The Federal Reserve announced several new rules like banning YSP loan commissions in an effort to minimize abusive mortgage lending practices.  The Fed actually said that mortgage lenders paying yield spread premium, also known as YSP led to the collapse of our housing sector.   The truth is that the Fed has had knowledge of broker paid commissions since it began well over a decade ago.  To say that the brokers charging higher rates on artificially reduced Fed rates caused the housing crisis is absurd.

Will Banning Mortgage Rebates Help the Mortgage Industry?

These new home lending regulations are part of the new financial reform legislation mandated by Congress.  The new rules apply to mortgage loan originators, brokers and loan companies, including banks and mortgage firms employing them. Under the new regulations loan originators may no longer be paid a increased commissions for suggesting one home  loan over another.

How will the YSP Ban Affect Your Business?

This is a devasting blow to loan companies that seek talented loan professionals.  As most of you know, loan officers were paid higher fees for charging a higher interest rate on mortgage to consumers over the last few years.  The fed is blaming the foreclosure crisis on mortgage brokers. 

 

Will this be the end of No Cost Mortgages? The rule change is intended to prevent loan originators from receiving higher compensation at the cost of damaging consumers.  Mortgage lenders can still continue to receive fees that are based on a percentage of the loan amount, however, which is common in the mortgage business.  Many loan originators have been sharing their yield spread premium commissions with their borrowers in an effort to reduce or even eliminate closing costs.  Where do you think no cost mortgage loans originated from?

Loan originators will also be prohibited from receiving compensation from both the consumer and another party such as a bank or mortgage company. Consumers were typically not informed that loan originators and brokers often received payments for their work from both parties. The new rule seeks to protect consumers who agree to pay the loan agents through a higher interest rate or through fees such as points charged up front on a mortgage are not paying more as a result.

The Fed said they are also instituting a rule prohibiting loan originators from directing a consumer to accept a home mortgage that is not in the consumer’s best interest in order to increase the loan agents’ compensation. The rule preserves consumer choice by ensuring that consumers can select from other home loan options, including loans with the lowest mortgage rate and the least amount of closing costs rather than loans that pay the originator higher fees.  The new YSP rules are set to go into affect April 1, 2011.

Does the Fed Have the Governing Authority to Ban YSP in all 50 States?

The Lead Planet believes that in a free market society in the US that charging a premium for your services is a great American virtue.  Better disclosures would have been a better solution rather than banning sales commissions to loan officers.  For now, we are reporting that once again our government has taken measures to strip some of our liberties. I don’t believe we have heard the end of this issue.

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Internet Mortgage Lead Generation Campaign Improves with SEO

In the monthly mortgage lead generation report, the Lead Planet announced a significant improvement in lead quality from the previous month.  Internet mortgage leads converted over 17% better in June than in May!  Our mortgage clients reported better credit quality and higher conversions on both purchase and refinance leads! A spokesman for Lead Planet said, “As an internet mortgage marketing company we utilized our own search engine marketing strategies to focus on keywords that drove traffic to loan applicants with better credit scores.” 

Our mortgage SEO solutions continue to help our clients in multiple ways because we are able to target specific niches through precise internet mortgage lead generation campaigns.  Whether it’s VA, FHA, conforming or jumbo, the Lead Planet has the ability to significantly increase search engine ranking for most mortgage websites that display original content.

Call 619-600-5720 to get more information on mortgage lead generation, search engine optimization and custom websites that rank high and perform well on Google, Yahoo and Bing.

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Refinance Lead Activity Jumps

The good news for mortgage professionals last week was that refinance lead activity rose to its highest level in over a year. Lead Planet chief economist, Kevin Grant announced Friday that refinance applications increased 5.9% to 2116.3. The overall rise in mortgage leads online crept up 6.6% from the previous week. Grant said that this was the most significant increase since May of 2009.” The Mortgage Bankers Association said in their report that the Refinance Index increased 12.6% from the previous week. MBA also indicated that the adjustable-rate mortgage share of activity decreased to 4.7% from 4.9% of total applications from the previous week.

The average mortgage rate for 30-year fixed-rate mortgages fell to 4.67% from 4.75%, with points decreasing to 0.96 from 1.07 for 80% loan-to-value (LTV) ratio loans. This is the lowest 30-year mortgage rate recorded in the survey since the week ending April 24, 2009. The effective interest rate also dropped from last week.

The average mortgage interest rate for 15-year fixed-rate mortgages dropped to 4.06 % from 4.19%, with points decreasing to 0.97 from 1.00 for 80% LTV loans. This is the lowest 15-year mortgage rate ever recorded in the survey. The effective rate also decreased from last week.

The average home loan rate for one-year ARMs was unchanged at 7.05%, with points remaining constant at 0.27 for 80% LTV loans.

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Whisperings of Mortgage Professionals – Mortgage Lead News

Home mortgage rates dropped to record lows last week, but many mortgage brokers and lenders were not cheering. With banks offering more affordable home loan rates than ever before, you would think the professionals selling interest rates and finance opportunities would be more excited. First of all mortgage rates have been ridiculously low for several years. Second, the mortgage guidelines have tightened to the point that not that many loan applicants qualify. Mortgage leads have increased slightly over the last few weeks, but most applicants simply do not qualify.

The new finance reform bill comes down hard on loan professionals for misconduct and fraud. Sure some of the requirements for mortgage lending need to change, but fairness seems to be disappearing from the reform bill. Privately many mortgage brokers are concerned that our government is trying to cap their income. Most of us believe that in America, the land and the free that you should not have your government limiting your income. According to BofA mortgage executive, Jeff Moran, “There seems to be two sets of rules —-One for the conventional mortgages and another set of rules for the government backed home loans.” Moran continued, “With our economy and housing sector in such a fragil state, it is imperative that we make industry changes that protect consumers yet do not hinder genuine home financing opportunities that will help people in our economy get back on their feet.

Is it fair that the government that was involved in pushing risky loans to unqualified borrowers should be dictating how much money we should make? The competitive nature of the mortgage business has been the driving force for new lending products and finance opportunities that have helped this great country expand. The notion that our government is implementing restrictions on our industry yet the government mortgage products are exempt from disciplinary repercussions is maddening.

What can you do? Be vocal and get involved with groups like the Mortgage Bankers Association and local groups like California Association of Mortgage Brokers. There are local mortgage associations in every state, so get involved. Partner with mortgage marketing companies like the Lead Planet who will support you with industry news and internet mortgage leads that will help increase your cash flow. Call 619-600-5720 to get more information on new mortgage lending opportunities and online mortgage lead promotions.

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