JacMac … you are not ignorant … you got caught up in the “shell game” that was being promoted by several lenders to mortgage brokers

JacMac/ ALan/whomever,

When are people going to get it. Banks and Brokers are all after the same thing. The bankers that I know, are the same liars and cheaters and are worse then brokers. More on that a little later. Enough with just the brokers being the bad guy. Many banks offer the same products that a broker can offer. They have the same relationships that brokers do with every other bank that has a wholesale channel for the products that they do not sell. Just because you walk into Bank Of America or Wells Fargo doesnt mean your getting the loan from them. They broker loans just like traditonal brokers. Funny thing though is that Bankers and Banks do not disclose YSP to the borrower, ever. I know hundreds of bankers that were making 2-4 points on every deal through YSP and never having to disclose it. Now, how is that fair and honest dealings? Why aren’t banks required to disclose? Since it’s such a big deal and everyone is complaining about it, why don’t banks disclose it? Think about it!!!

Dont tell me and don’t cry that brokers are all bad and just after a buck. What do you think people are here for? People have a job and choose a profession to make money and to provide for their family. Why is it that every cry baby homeowner and politician that jumps on the band wagon of “poor me” has to smear blame to every orfice of brokers. HOW ABOUT LOOKING IN THE MIRROR? I’ve worked on both sides and to be in the banking side was total promotion of fraud through superiors. Hit the numbers, hit the numbers, hit the numbers. We are not talking about a closed victim subprime lender of the past year. They were the biggest lender in the country for whom I worked for 5 years…..hmmm. Yeah, many of my colleauges were never licensed or trained properly and many regulations such as RESPA were never adhered too. You work for a bank and there is no education or licensing requirements. What the hell is that? In Ca where I am from, Brokers must have licenses, experience, cont ed, and pass a rigourous test through the state. It’s a total joke the level of intelligence that banks hire. I could go on for days but you tell me who the culprits were and still are and will always be. Next time when your considering your own loan or your speaking with friends of families about mortgages, please be very aware that brokers are not the only ones to blame here and take a look at every intersection and the banks that sit on those corners. There are several bandits within that system too, not disclosing how much they are making on your loan(s).

Yes JayMac, it is the broker’s fault. It certainly could not be you, the one that had the opportunity to get a fixed rate loan but chose the 1% option ARM instead. You certainly did not want to pay any principle on that inflated home that was going to make you hundreds of thousands in appreciation, so you could brag at the golf club, much less the interest.

If it looks to good to be true, it usually is.

I need to clarify the Realtor commission comment. That is commonly seen as 6%, (but always negotiable), BUT this is split between Realtors, giving them each 3%. At least buyers and sellers know what the fee is and know they have the opportunity to try and negotiate it.

Y’all need a sobriety test. Remember the 4 “B”s – Brokers, Buyers, Banks & Builders. All are pushing the same product for the same reason … $$$ in their pockets. The rest of society are just pawns in their game. Not unlike “Big: oil, Lawyers/Lobbyists, Military/Industrial complex, etc….everyone else is just cannon fodder. A government by the rich exclusively for the rich funded by the middle class. When was the last time you ever witnessed congress doing anything for an individual. I’ve been around 60
years and I’m still waiting.

A final note. If everyone could read & understand English, they would all know how to read terms of loans, etc.

brief suggestion to any who says that the YSP was not disclosed to them at closing. Check your HUD-1 (doc with all the costs on numbered line. The YSP is generally on 1300-something.) If your YSP is not disclosed IN DOLLARS get to an attorney. You have 3 years to rescind (refi on your primary only). This can be a very good deal for you and very expensive for the lender. They will be quite inclined to negotiate a restructure.

On these option ARMS and subprime loans, everybody knew what they were getting, the borrowers and the brokers. This whole US consumer-driven economy is fueled by debt. Our own government is in the hole for $9 trillion ($9,000,000,000,000). This is another wealth cycle. The rich get richer; the poor get poorer. Merry Christmas!

Lumping “all” mortgage brokers into one group is irresponsible. Some of us are moral, ethical, professional, educated and do act as financial planners. We spend tens of thousands of dollars on continuing education to make sure that we thoroughly understand our clients’ situation and place them in the proper loan program. Option ARMS were typically given to savy investors who had the equity to borrow if they chose to make the low start rate payment. I blame our industry: The investors who purchased these products on Wall Street-they set the guidelines; the banks who set the price and gave the option to brokers to get YSP of up to 3-4 points on the back side while charging origination points; state licensing who gave licenses to inexperienced uneducated, greedy, unethical people whose career path had never been the mortgage industry but jumped in for the easy money; The Department of Corporation who allowed anyone breathing to sell these products (yes, these are the banks) without any licensing at all.

So, my 25 years in the mortgage industry, tens of thousands of dollars in continuing education costs, tens of thousands of dollars in marketing costs means nothing right now. I am being lumped into a group of people, labeled by other people who know nothing about me, my work ethic and what I stand for. Now, Congress wants to get into the act by punishing mortgage brokers by taking away YSP which eliminates the consumers choices and drives them back to the banks. Geez, it makes you wonder who is behind all of this?????

Do the consumers realize that they are about to be hosed all over again? Do they realize that Fannie Mae and Freddie Mac are going to price everyone out of the ballgame by charging borrowers for HUGE add-ons for having higher LTV’s over 70% and credit scores under 680? Without YSP to build some of these costs into their interest rate, their origination and discount points alone could exceed 3-5%, excluding closing costs. Every other investor will follow suit and congratulations, our industry has truly imploded and guess where the consumer has to go for a loan? To the banks!

Mortgage Brokers serve a purpose: To give the banks competition so that the consumer has a choice. I am with Mike. You call everyone in my database and ask about their experience as my client. They will confirm that I was fair, honest, professional and ethical. They received the rate they were quoted as locked and their final HUD-1’s were almost identical to the one they were given with their initial application. As brokers, we are required to disclose ALL compensation on our state good faith estimate. The banks are NOT required to disclose YSP or SRP on their up front disclosures. HMMMMM there seems to be a pattern here……I wonder who the government would rather see fail: Mortgage brokers or Banks……Caveat Emptor!

Great Post Big Ed! A lot of my clients called me wanting an Option ARM or Pick-A-Pay loan (four payment options). I provided them with pages and pages of information explaining, in detail, what this loan meant: If you chose to pay the low-start-rate YOU WILL HAVE NEGATIVE AMORTIZATION (at least after 2003) which meant you were borrowing on your equity! YOU WILL OWE MORE THAN YOUR INITIAL LOAN AMOUNT IF YOU CHOOSE THIS OPTION! When I explained exactly what this loan was and how it worked, less than 1% of my clients ended up with this loan who weren’t real estate investors. I did not deal in sub-prime loans, I was exclusively an A paper broker.

I have been in the mortgage business as a broker since 1990. The situation we are experiencing now is not all that much unalike the S&L crisis of the early 90’s. Simply put there were a few “bad guys” that caused a lot of grief for a lot of people. And, in time, we survived.

In recent years investors brought to the market place creative financing. The borrowing public used the creative mortgages to purchase homes when they could not get conventional, fha or va loans or loans from the local bank. The reasons are simply 1) credit issues; 2) not enough down payment or equity; or 3) more house than income would support. So here come the problems.

1) stated income – really over stating the income to get the mortgage done.
2) more than 100% mortgages – up to as much as 125%!!!!!
3) bogus w2’s , pay stubs, voe’s, bank statements and retirement money.

Investors knew what they were doing. Lenders and underwriters knew what was happening. Mortgage brokers and loan officers were giving the borrowing public programs to get into houses or refinance houses. And the borrowing public knew what they were doing.

People complaining about 9 and 10 percent interest are really out of line. They are complaining because they can’t make the payment. In 1983 we purchased a house with a conventional loan. We paid 2 points and paid 11.25%. It was a 30 year fixed loan. We paid our mortgage. So what’s the problem? Eye’s are bigger than the stomach? Not paying attention to the obvious? Turning heads away from reality?

The sub-prime loans or non-conventional loans as I prefer to call them were to be stepping stone to get to the conventional, fha and va loans. Unfortunately due to competition and demand for more business the investors kept losing up the guidelines. As has been said in another industry “If you can fog a mirrow, you can get the p…..”.

Now we will all pay the price.

YSP is not really an issue. Being paid a reasonable income to do a job should be acceptable. This particularly when compared to the credit card companies charges!!!!! And a comparison can not be made with real estate commissions since those fees are split up. I know. I own a real estate company as well and, in the past, I have sold real estate. The inequity is when the mortgage banking and brokerage communities have to disclose and the banks do not. Hmmmmmmm!!! So who is or isn’t informing who? Gee, the consumer???

Most mortgage people do a good job. Unfortunately now those of us who are left will have more legislation and regulation. In stead of more legislation and regulation, government should simply enforce the existing ones. Layering legislation will not eliminate the “bad guys”. As always they will simply figure out a way to get around it all. Pulling their licenses and assessing penalties swiftly will go a long way.

Anyway, to sum up, the mortgage banking/broker community is a tremendous marketing system. We need it and all of the good mortgage professionals to help many, many people in the next few years. So hats off to the “good guys”. Don’t quit

Good post Joe. What I feel very strongly about is more stringent regulation re: the licensing of loan officers. After all, it is not just about sales. It is about the consumer’s lives and well being. There should be a minimum requirement re: experience and education. Anyone can pass the CA licensing test. I completed it in 20 minutes. What it takes is understanding what you are selling and how it affects the consumer. Most of the “bad” loan officers had no lending experienced, passed the test and were off and running. They were not trying to build a business, develop a referral-based database of clients or care where the client would be in 2-3 years. Banks SHOULD NOT BE EXEMPT from licensing regulations. There should be a level playing field and the US government should not be allowed to make the mortgage broker extinct. I believe in responsible capitalism and no one should be able to tell me what my time is worth after all the time and expense I have put into my career.

Merry Christmas to all!

Virginia, you are exactly right. I’ve worked in both arenas. It was an absolute joke whom these financial institutions were(are) hiring. No licenses needed at all when you work for a bank.

Here I am, with a business degree, experience, licensed, continuing education credits and referral business that was built from the ground up and they(managers) are hiring 18 year old kids and telling them to lie, cheat, and steal. No degree, no education, and Zero training for your home loan consumer. Biggest decision/investement that 95% of americans make and the government allows banks to hire individuals like this without any education, experience, or training. Further, they continue to allow YSP to go undisclosed. Level playing field? Consumer protection? Banks should have minimum requirements and mandatory training and licensing before they even set foot into a mortgage operation.

I worked for First Horizon Home Loans, which is a subsidary of First Tennessee Bank. Never was there a training for new LO’s or education requirements. They hired whomever called in and asked for a job. It was disgusting. This is one of the reasons I departed.

Anyways, it’s good to know that there are good people fighting the good fight. We will be here because we are dedicated to our clients and that relationship, not a simple transaction.

Sandy, right on!
Unfortunately history repeats itself – S&L and now. And you are right! Again, it goes to accountability, responsibility and work ethic. And, as you said, there are no consequences. Let’s just take care of everybody. What really irks me is that I work hard and I don’t get any handouts! But I gotta help the government take care of those who work the system instead of working for a living.

Ya know, in sports if a player isn’t up to par for whatever the reason, the coach replaces him so the team, get it, the team can win. But we’re like that battery that keeps on and on and on and we keep payin and payin and payin. I work so hard and I feel so dumb. I just wasn’t smart enough to figure out the system and work it. But then again I wouldn’t have a house on the lake, 2 cadillacs, 2 bmw’s, a boat in my back yard, water skiing at lunch time then back to work, a very nice large big beautiful four level home with a very large big back yard on the water, money in the bank, oh, I own two companies, I went to cash in my 401k in early July, oh, I shoot a real low 80’s high 70’s golf with a private forever tee time. Darn, I wonder who’s workin the system? Can’t get all of that workin’ the system, if ya know what I mean!!!!!!!!!!!!!!!

I tell my loan officers, run…………run…………..run faster…………..run faster………..early bird gets the worm………….run………don’t look back…………..run, run, run, run, run, run!!!!!!!!!!!!!!!!!!!

FHA reform is definitely in the works. The Senate FHA-modernization bill differs in some significant ways from the House bill. Both the House and the Senate versions raise cap limits, the maximum dollar amount of mortgages that are eligible for FHA insurance, but the House bill is much more aggressive in nearly every one of its provisions. The Senate’s version sets the cap at $417,000, while the House would set the cap at $729,750, which is more than twice its current amount. That will give many more home buyers, especially those in high-priced areas like California, access to FHA-insured loans. The House will also allow more people in by accepting no-money-down deals, unlike the current policy, which mandates a 3 percent down payment. The Senate bill still requires a down payment but halves it to 1.5 percent. Both bills relax the strict provisions that have kept FHA insured mortgages of limited use in buying condos and manufactured homes. The next step for the FHA modernization bill is for members of the House and Senate to work out the differences in the two versions. Stay tuned…..

Virginia,

Profit margin for absolute middleman industry shall be capped. YOU DO NOT ADD 2 CENTS VALUE to economy by brokering and as such your fees should be capped.

You may be honest LO/broker but fact of the matter is that 90% of your occupation are shysters. Among borrowers in last 4 years that percentage is less perhaps 60% tops but the fact of the matter one shady broker will inflict far greater damage than one stupid borrower. Live with it, stricter regulations are coming and I WILL bring message to my elected officials that your industry MUST HAVE the same standards as security brokerage industry along with the message that stupid decisions made by BORROWERS should not absolve them of any responsibility.

BTW Alan: What career are you in?

I’m with you Mike! If what you are saying is true re: securities brokerages, I’ll take that 4-6% raise any day!

I worked for a major mortgage banking firm that imploded in
August. I now work for a large bank. The YSP issue that keeps coming up in these discussions between mortgage banking firms, banks and brokers about disclosure has always been pretty clear to me. If you put up your own money to close and fund the loan in your own name you do not have to disclose the service release premium you will earn if you service the loan or any premium you would earn if you decide to sell the loan. If you are a broker and use someone elses money to fund the loan whereby you have no risk involved with your own money you must disclose how much premium you are earning between what the lender sold you the money for and what you sold the money to the customer for. I agree that brokers play an important role in mortgage lending primarily due to creating competion for the mortgage bankers and at the end of the day competion helps consumers get better rates and fees. My proposed solution for fair disclosure would be for all players to have to include the YSP or SRP into the APR which we all know is “supposed” to be the equalizer when comparing offers between lenders. The problem with this however is that the TILS’ I have seen over the years somehow misteriously leave out many of the true costs from the APR calculation. Any ideas?

I owned an investment firm for 10 years before entering the mortgage business. The market pretty took care of the commission and it moved up and down with the size of the transaction. Now this is during the 80’s. I can not address how it works today. However, again, I do not have an issue with a 5% high cost limit. And, again, I have felt properly rewarded for all transactions, large or small, difficult or not.

The issue of capital risk being the basis of ysp disclosure may be valid. However, the bigger issue is disclosure to the consumer. They, then, will be able to compare “apples with apple”. Ever heard of that, Alan? Alan, while you’re at it why not totally remove the free enterprising element of the capitalistic system. Just control all revenue, income. While you’re at it control all the expenses too. This way all the profits will be controlled. Talk about going backwards!!!!!

It is true there are “bad apples in every bushel”. It is now true, a therom, “all apples in the bushel are bad”. So Alan has some learning to do. Some day, Alan, you will understand “throwing out the baby with the bath water”.

Our system of government isn’t perfect. But it’s the best we have and it’s the best on the planet and has been for over 200 years. So there must be some validity to the system even with some spending waste and some corruption. Again, I don’t believe we should throw out all government officials, top to bottom. Our political system, again, does work quite well.

So given issues and imperfects, we’re still here!!! Again, the mortgage banking and broker systems are large marketing systems that have worked well. We need to do some house cleaning. And that is what is being done.

By the way, Alan, you can keep your job. However, the boss just came in to announce that your salary will be cut by 25%, but you have to continue doing the same job and working the same hours. OK with you?

Mike you said: “WHo are you JacMac? Please explain yourself.

Last I looked, this forum was to help HOMEOWNERS become informed and to advocate for them. It wasn’t for me to come on and talk about myself all day long.

I tell my story only as an illustration and to explain where I’m coming from. How much more information would anyone need?

If I was to make it a platform to talk about myself and I, I, I all day long, I’d being displaying the narcissistic behavior that I read when ever the post starts with “BUT I did this”, and “I never did this”, and “I always acted like this”, and “I think this” –

NOTE to all the disclaimers: It’s not all about you. If you weren’t a part of the problem, then why do you respond to the accuasations?
Be a part of the solution. What are you doing to help?

If you were a part of the problem, than what you can do to help should be crystal clear, unless you’re a criminal with a narcissitic mind, then you simple don’t give a damn.

Abe, thanks for the advice to both the Honest Broker and the Consumer.

Name calling and blaming only works for those invested in never becoming accountable. I never said I blamed all Mortgage Brokers.

“This was a decent industry until they let the idiots and criminals participate.”~ Sandy

Sandy, I blame the criminals. Some people can’t help being idiots, but criminal behavior should be penalized and those who participate in them should be held accountable. Predatory lending SHOULD be a crime.

I have been in mortgage lending full time for 25 years, in real estate for years prior to that. The option ARM in my opinion is a horrible product- I have done maybe 4-5 in my entire career. I made sure these people fully understood the product, and they all were financially secure enough to handle the risks of this loan. Customers need to bone up to the fact that they took a huge risk getting a mortgage that had a ridiculously low payment. I will agree that there were many slime balls that entered this industry and pushed this product, but there are lots of slime ball car salesman that push trading in your upside down car loan in on a new model and jack the rate on your new lease payment, and collect compensation from the finance company (that is never disclosed, like brokers). I got a bid for replacing my large concrete patio from 3 contractors, and the bids were a long ways apart, one was twice the amount of the low bid. Do I know what the net profit is for each contractor? All I should be concerned about is what kind of product I get for my money. Prices vary in all industries, the customer needs to shop. Any prudent customer that got those 3 bids should have questioned and researched the low bidder and check references to make sure the guy could perform on his bid. YSP (Yield Spread Premium) serves a purpose in making sure my doors stay open, and gives me an option to give a low cost/ no cost loan to my customers. It should not be used to fatten my wallet so I can rape and pillage my unknowing customers. Education courses for licensing do not make a person ethical and will not work. I have no problems with limits on compensation as long as they are reasonable. The banks should not have allowed those ridiculous rebate points unless they provided a net benefit to consumers, in the form of reduced closing costs.
Customers need to protect themselves by shopping and education. Perhaps it may be necessary to require customers to pass a web based test prior to the closing for ANY adjustable rate loan, in order for them to fully understand the terms, and keep the lenders free from fake “I did not know” claims.

I appreciate everyones comments. Virginia, Todd, Mike, Abe, JacMac and Alan (as usual ) . Even the bonehead comments because what would a comment section be without the typical rants and rubbish. The well thought out comments are very much appreciated by all.

This is a very touchy subject. JacMac has been a trooper about letting me post her comments. It gives homeowners and others a look at the playing field from both sides of the fence.

I am not trying to pit homeowners against the mortgage industry, just educate one another on how each ones us “views” the mortgage world. We all do not see things the same and we are not all right or wrong. There are truths in all the above comments.

Not all mortgage brokers were scammers and predatory and not all homeowners knew better. A lot were on both sides of the fence.

But what are we going to do? The damage has been done. What can we do to make this a better world for all of us?

I am here to help the underdog right now and that is the homeowner and give the ethical mortgage broker a voice.

Cheers and thanks for another great debate!

Moe, thanks for as usual, being the gentleman mediator.

Mike, I have never alleged anything against all MBs and did not call them all criminal — but there are many who are.

I haven’t made allegations against you personally, only those who are guilty.

I think what you are doing for this woman is commendable.

Virginia, you made some great observations and I am a great fan of communication — it is always helpful, even when there’s bickering

Todd, I agree with you that the option ARM is a toxic product, especially in the hands of unethical professionals and ignorant, uninformed consumers.

We are in this situation together, as Virginia pointed out and we will all suffer tremendously if we don’t work together to come to a solution. Ultimately, that is my view point.

the bottom line is that all of these products were offered and being pushed. if you have a LENDER/BANK willing to loan 100% to a 520 credit score then i do not see why the fingers are being pointed at the brokers. they are not funding the loan. And yes, the loan officers should have the decency to tell the borrower that they are not in a financial position to get such a mortgage (and many did) but as soon as that would happen, the borrower would go down to road to another broker and get the loan done. i saw it happen over and over.
the united states is a consumer nation who want what we want NOW. no one can argue this fact. just look at all of our fat a$$es in debt personally and as a nation. why anyone decided that to offer a 30 year debt to someone who has never paid a bill in their life is beyond me but everyone did. now these people are not paying their mortgages. DUH! so lets refinance them…..once again, a lot of these people should have never gotten the loan in the first place and it is damn near impossible to get them out of it now. the fha secure is b.s. b/c unless the lender will turn their head on other factors of the loan such as DTI then these people do not qualify. stated is practically a thing of the past unless you have 700+ credit scores and those people are really not the problem. investors are running away from MBS’ right now and i don’t blame them. i wouldn’t want to loan these people any money, especailly now that there are so many declining markets?
so what do we do now? seems that lender’s have chosen to stick with cookie cutter deals for now. fine by me, but i really feel sorry for the self-employed borrower who cannot prove their income enough to qualify (if they have a good cpa).
this industry is just a mess right now and i am really just so tired of finger pointing. everyone is to blame. lender’s offered the loan, brokers put them into the products being pushed, borrower’s accepted the loan and did not do any reasearch on the biggest investment and longest debt of their life and now we will all suffer in some way.
if anyone has any PRODUCTIVE ideas or solutions i would love to hear those thoughts instead of constant negative.

Good and fair dealing mortgage brokers are here to stay. We positively impact the lives of so many people. To think that all the positive that has been done for years, will all of a sudden disapear. Not going to happen. Our volume is up over last year and next year even better.

Good mortgage brokers?? Very rare indeed. This country is built on greed. Nobody cares about there clients anymore. We are living in a very sick country. Wall St. cant be trusted, the gov’t certainly cant be trusted, and the mortgage industry has joined the pack of wolves. Now the next scams i see happening is credit repair, life settlements, and debt settlement. I am so thankful I am debt free and rent.

Good Editorial – I hope it is wrong. I have been in this industry for 31 years and have seen the ups and the downs. Opened the first wholesale office for Far West Savings and Loan in Northern California outside the Bay Area in the mid 80’s. Back then it was us and Sunrise Mortgage doing wholesale. It has been a long and fun ride. The banks fought us in the beginning and it has always been a love hate relationship. We will survive, but in case we don’t, would you like fries with that order?

I think that your article hits it right on the head! It comes down to survival and the banks want to survive. Unlike the references that are being made to the S & L crisis, this time it is a global issue. Foreign and American investors will NOT touch our securities, in fear that they will lose milllions. Why? Too many hand in the pot and no guarantee that what they will buy is not just smoke and mirrors. The solution..simple..eliminate the possibility of tampering with the loan…this means no MORTGAGE BROKERS or APPRAISERS that can monkey around with the loan package. So banks are now forced to keep it within the retail, under their control, to assure that they will be able in the near future to start the investment engine again..

Brokers don’t want to hear or acknowlege this fact… it isn’t about your little 5-10 loans a months..the banks need the investors and they are going to do whatever it takes to keep the billions of dollars flowing..

Brokers don’t like it then complain to your precious NAMB..who did what for you except, collect your membership dues? And what are they doing now to protect your industry??? NOTHING!! WHY? Because they don’t control the money of wall street….the banks do..and there is NOTHING they can do about it! They know it and won’t admit it to any of you…

When anyone loses a profession its a saddening and hurtful experience. I have had bad experiences with real estate and mortgage brokers but I did not blame the whole industry. That is too easy and convienent. I have learned to sell my own properties and use cash to buy property as well. I really believe people can sell their own homes without a realtor and of course I will get the RE professional telling me to take a hike. I understand as well its a business and that perspective is appreciated. From where I sit I have taught my whole family how to buy and sell property without a RE agent. Call it a saver of about 6%. Who knows their own property better than the person that is selling it? I believe the RE profession will be a thing of the past as well as the mortgage broker. They crowed way too loud when the going was good and people will not forget that. I also know the Mortgage Brokers Association and Real Estate Agents Association kept up the cheerleading even when the situation was dire. The truth would have been easier and much more appreciated that cheerleading because your industry was in free fall. In a act of genorosity I wish all of you the best in searching for a noble profession. Its about time.

Ann
Lets play nice in the sandbox with the kids who arrived on the little bus!:)

wow, you really don’t like brokers or must have been burned. when i look at the drug industry, the investment industry and about 12 other diffrent industries. i can only say where is there an honest i care about my customers needs before mine industry. let’s not be so fast to kill the mortgage guy there is a couple of others that have gotten away with a hell of allot more. how many investment advisors gave a thumbs up to the market before the crash. fundamentals didn’t matter…

Aaron- Investors have no say so on what lenders do and brokers have no power when it comes to what Countrywide, CITI or any lender decides to do in regards to its business.

Do you know that lenders have to buy there loans back if there is fraud in the origination process? That’s alot of buy backs they are going to incur over the next few years and these losses will continue.

you said, “You and all the other retail/bank people just don\’e2\’80\’99t understand that we were 75% of the business coming in up until recently”

well duh! until the subprime mortgage market imploded….

YES\’e2\’80\’a6Good luck with your loan officer career, you’re going to need it. I am not wishing anyones financial demise and I am not predicting that this industry is dead. But I think that it would be safe to say that the horizon doesn’t look to good for the mortgage broker and it might be wise to explore other opportunities while your cashing those checks.

Robert – Millions are being funneled to non-rprofits to clean up this mess. There is talk about having home preservation centers in all major cities that will be ran by non-profits.

Take a look at NACA.com and you will see the future of this business. This model might be the mortgage model of the future.

Comicpro – I agree with you. The market, price, location and sign in the yard sell homes, not real estate agents. Help-U-Sell dominated in Corona, Ca. during the boom because people were sick and tired of hiring an agent for $30,000 and the home selling as soon as it hit the MLS. It wasn’t the agent that earned the money at all.

The only extreme advantage that Realtors have is the MLS and vast network of professionals that access this data and disseminate it to their clients. This alone can be very valuable when a quick sell is needed.

If you have time, by all means, you can sell a home yourself with a trusted advisor or attorney.

Take a look at all the major non-profits boca. http://www.NACA.com, http://www.nw.org and http://www.995hope.org, these are the major players of the future and look who is on most of the non-profit board of directors, oh, lending executives, what a surprise.

Thanks Moe. I just get tired of the “you can’t do it because you don’t know sign” they hang around their scrawny necks. Oh sorry real estate folks!

Yes Aaron you are correct…THE BANKS DO NOT WANT TO MAKE MONEY OFF OF YOU! Why? Because today, Goldman announced that Citi may have an additional 18 BILLION in write offs..Do you call that making money off of you? No..you and your industry are now a huge LIABILITY to the Banks..wake up and smell the extinction…

Marvin..it is obvious that you don’t want to face the reality of life after a six figure salary..People in the industry that are leaving are facing the reality of 40-60K or the expense of learning a new trade..hard to accept that you may have to sell your McMansion or turn in the leased BMW..

Those that will survive in your industry are the ones who did not adjust their lifestyles to a wannabe Donald Trump..because survival will mean accepting a job with one of the banks that make it through…

Marcia – I am aware of this and of course retail had a huge part in the crisis. But they have deep pockets backing them up private meetings with our Sectretary Treasurer.

I have a good friend that owns an ethical, major bokerage here in Corona and he is fighting and not giving up. He also thinks that brokers will survive. Sometimes he says I am negative, while I can be, but I am more of a realist.

I am not one to eat a crap sandwhich and say, “this is the best sandwhich in the world!”, No, it’s a crap sandwhich and it definitley taste like crap. However, I will hopefully be eating a turkey on wheat tomorrow. That is being a realist and telling things like they are.

I look at the industry and things do not look good for him and I just hope everyone realizes that there is a lot of crap sandwhiches going around and a lot of people are claiming they are eating turkey sandwhiches when we all know, that isn’t the truth.

Comicpro – hahaha

I have been in the industry since 1975, before Brokers. When brokers first came into the picture they served a specialty niche (subprime) aimed at people with poor credit and provided a great service alternative to the retail banks. That niche is all but gone today. The lending world did quite well before brokers and will do just fine without that segment of the industry.

Moe — you are correct — the majority of mortgage brokers will not survive 2008 because of “no consumer confidence” in the concept that the mortgage broker is acting for the consumers’ behalf. And those mortgage brokers that manage to stay in business will have to execute new contracts with the remaining wholesale lenders that will include “buybacks” & “personal guarantees” as well as “commission recovery” for loans that have a delinquent payment … say in the first 18 months … as long as a material misrepresentation of fact is found on the 1003 … such as stating incorrect income or assets to make the deal work … or credit “repair” in order to manipulate FICO scores to meet guidelines.

What happened aftert the S&L Crisis of the early 90’s…than the fallout of the 125’s in the late 90’s and now the subprime Crisis of the mid 2000’s. It is all part of the cycle going up and coming down hard. After the smoke clears and the industry as a whole, banks/lenders/brokers have a chance to put thier thinking caps on, if they have not already started, they will come up with new programs to do one thing. Fund loans. yeah it will be tougher and many of those landscapers may not qualify for loans, but the business is going nowhere brokers included. There are plenty of honest brokers still helping people in this mess of a time in the industry.

One question for all the people who think the banks are perfect. Who came up with those creative programs and paid Commission to thier AE’s to push them to all the brokers and funded those loans. yeah plenty of brokers cheated everyone by misstating income or doing flat our fraud, but if the lenders did not come up with SISA, NINA, NO DOC and all those programs they would not have been there for the brokers to sell. Think about the Professionls selling Neg Ams… Downey Savings, WAMU, World Savings, they crafted those loans and built in the PPP and everything else. Brokers may end up taking the blame but the problem was industrywide. Greenspan made a statement that he could never have really forseen the true impact of the subprime market…BS in CAPS that old man is very smart and the Bush Administration needed some part of the ecomomy to flourish to help fund thier OIL war. Things are much bigger than brokers doing LIAR loans.

Definitely an interesting article. I’ve been in the industry since the early 90’s and have worked as a loan officer, middle manager, and executive over the years from small companies to big banks, from retail and currently in wholesale and as much as I hate to say it, or even admit, but things will get worse before they get better. Am I concerned for the future, very much so. Am I thankful that I can still work in an industry that I love and still pay the bills, definitely yes, but I know so many more that are unemployed and suffering because of unethical practices and no morals. Could I have made more money doing fraud, like so many others did, yes, but at the cost of my conscious, no. I’m glad to see all the fraud cases being pursued and I hope all of those who hurt so many, including all of us who did it the “right” way, go to jail or at the very least, get what’s coming to them. Life has a way of balancing everything out. So I hope you enjoyed it while it lasted.

For those of you that made money and started living the “champagne” lifestyle, lesson learned: save money! As for me, I paid off most of my bills. Yes I have a BMW, and yes I have a nice house in the hills, but that’s because anyone who knows how this industry works and understands it, planned for this “correction.” None of us expected it to be this bad, but you’d have to be foolish to think it was going to last forever. So for all you people that got rich quick with no clue as to how you did it, and now don’t know what to do, sorry, maybe you should’ve learned the business before you started destroying peoples lives for the sake of a commission check. I don’t feel sorry for you. I spent years, 7 to be exact, as a loan officer learning my trade, before I got into management, and to this day, I deal with brokers who have no clue as to what they’re doing. Those brokers will be extinct and soon. Brokers who know what they’re doing and can change with the market, and have ethics, will survive.

For all the good guys out there, I wish you luck and hope you find something soon, or I hope you survive this mess to come out stronger in the end, and when this market does turn, only “true” professionals will be around to reap the rewards, whether they are brokers, bankers, or corporate big boys. Those who know how to survive, will! Those who were here for easy money, see ya, good bye! Go back to selling cars or whatever it is you did before you spoiled an industry that so many depend on.

Happy New Year to everyone. I hope the new year brings you all peace, prosperity and happiness, god knows, we could all use it!

Hilarious… Yes, there have been loans that brokers have done that have gone bad. There are also just as many that were done in the retail arms of Countrywide, Wamu, Chase, Bankofamerica, and my super favorite Ameriquest. While pointing your finger of fraud at brokers, please feel free to point them at these retail outlets as well. Ask any of the loan officers at these “shops” how to get a loan by an underwriter and you will get a huge amount of fraud ideas you never even thought existed. And it still is going on at some of these places. In 2005 the State of Illinois required all of its loan officers to pass a competency test and get licensed. We lost about a third of the loan officers in the state. Funny thing though. The loan officers who didnt pass a basic skills test went to work for the above companies that did not need to be licensed.
So the banks pretty much picked up all the sh*t loan officers and paid them a salary to write fraud loans with no knowledge of what the hell they were doing.

Yes, the banks were there before, but they still dont know sh*t about originating loans. That’s a broker skill.

Wholesale represents over 60% of total production. Subprime represented less than 20% of total production during the past few years. There are plenty of direct lenders with zero or a very limited retail footprint. Are you suggesting that all these lenders will go out of business in 08? TBW, Flagstar, Provident, …?

Vegas..
It was good that you back peddled a bit in the middle of your statement there. Broad generalizations are never a good stance to take. I do agree that there are idiot brokers out there, but uneducated… To be a broker you have to pass the test, granted it is not much more that study by memorization but the idiot brokers you are talking about probably worked for the Broker and did not actually have a license. And if all the brokers you worked with thought that 100% stated was never going away then you chose the wrong brokers to work with, or you were just trying to make money like they were from the begginning.
YSP should be there to help get the borrower a lower rate but it really was for brokers to make more on the back. But banks do price in a spread when they list thier rates, do you think they are giving brokers the rate they are getting from secondary, no they are making thier money too. The Good brokers out there never tried to hit home runs on thier borrowers if they were make a ysp and charging a point at the same time. They tried to make 1-1.5% total on the front and back get a good rate for thier client, call them back and keep in touch with them after the loan funded. Saying that all brokers are crooks and thieves is a harsh statement. There are plenty of AE’s who killed it because they had puffy lips fake tits and short dresses and told you to call thier Account manager when the question got to technical. If a Licensed broker did not know how to read a rate sheet, price a deal, structure a loan that was funded before it got submitted to the lender than they are in idiot. But genarlizing is just being ignorant. And coming from and AE who was not required to pass any tests to do his job is unfair.

Don must be a lawyer…I mean crook.

The banks were going in this direction for many years. The only reason that the brokers have even survived this long is that we have the local connections to people (realtors, accountants, planners etc.) We are the people that drag in customers off the street to do business. Banks wait for customers to walk into their doors brokers go to the customers.
In the last few years the banks have become more equipped to take back the relationship development aspect by creating a accessible conduit through the internet to expand the banks footprint. This was very apparent a couple of years ago. Even as production was falling the rush to get internet appearance doubled. Account execs were even eliminated at some companies, MILA for example, as useless tools (and they were). I told my account execs that this would be the future for originating loans. Why do you think there has been such a push for a paperless process? It’s not about the trees…

In general the last 15 years i have had as a broker have been awesome. even today I still have the network to get a nice volume of loans closed. I always have job offers available to me. I do not have any idea why someone would not hire a loan officer for a different position in another industry.

yes they sure do Dean…And they still get better deals than from certain banks…and sometimes they dont…but not by much…unless the broker is an idiot looking to hit a homerun than he is also out of the business now.

This article is dead on and there are actually 218 companies out of business as 12/17/08. It will get worse until they loosen up the cash flow. Wall Street and the Govt to blame. They knew what was going to happen and let it happen. So the banks won this round by trying to rid all the of mortgage companies to the wayside. I have been in busy for awhile and it will come back slow. The regulation will make worse for the homebuyer. But the idiot politicians can’t see 2 feet in front of them. The Fed are a bunch of losers since they helped create mess and ruined the dollar. The writer is dead on. That is why I started another company so I don’t get to screwed.

Banks make me sick! They act like they are so white and pure like the driven snow. Well I have a news flash for you out there in ferryland! In the last two weeks I have come across two hud-1 from previous loans closed by good old Countrywide retail and when I looked at the origination charged to the client they were both almost 4%! And while I’m on the subject of purity have you seen latley what banks charge the working class smucks for credit card intrest? They are as crooked as they come but they do it with a smile and a suit! They pay there help next to nothing! What everyone at the banks retail level doesn’t pay attention to is the amount of money they sell the loan on the secondary market, because they are not privey to that!It’s about relationships period! Banks do not care about clients and they sure don’t care about employees! Have you seen what some of the exiting CEO’s have taken with them as they left the big banks? This all cost the consumer right?

What exactly was the broker supposed to do? Wall street says “i want to buy loans with a 620 score 100%ltv Stated Income Investment properties” The lenders say “cool, I can commit to 1 billion a month of this product. The account executive tells his 50 broker accounts ” hey, we have a new silly ass program to sell your clients” The real estate agents ask ” Hey broker, do you have a loan with a 620 score Stated Income Investment properties with no money down?” (they don’t know what ltv means). The brokers put the deals together, the bank underwrites the deal, everyone gets paid, and then someone figures out that the housing prices had a ceiling. The buyers, most of them on their first investment property, had no idea how to get a renter in the property. Now the property is vacant and the price is going down. This whole process could have been avoided if the top of the food chain never offered this to the bottom of the food chain. You give a broker something to catch fish with, and we go fishing.

Bank of America has left the wholesale channel before and re entered when they felt the climate was better. Just because they or any other bank ceases wholesale does not mean it is forever.

I say, dont worry so much about material things, enjoy life you only get one, smile every day, treat others well and before you know it this will all be over.

MAKAI…you are right on with everything you’ve stated. Everything.

It’s obvious that the Lenders on here are gonna protect the Lenders, the Brokers are gonna protect the Brokers, and the Lawyers are gonna protect the Lawyers. Everybody wants to bad-mouth eachother and make themselves look good, but, like Makai mentioned, there are very good respectable PROFESSIONAL (in every sense of the word) Brokers and loan officers out there.

The ULTIMATE perpretrator in all of this mortgage meltdown is (drumroll please…)….the people/investors who allowed these programs to exist (SISA, NINA, Option Arms, PPP, 100%, etc.). BOTTOM LINE.

If these programs had never existed none of us would be talking about this and no one would be having to turn in their BMW’s back to the dealer.

Now regarding the people who went to work at Countrywide, or any other retailer during 2002-2006, YOU MISSED OUT ON THE GOLD RUSH! Us brokers made double what you made doing the same amount of work or less. Don’t blame brokers for this. Blame yourselves.

But again, whoever invented these programs and allowed them to exist are the cause of this Mortgage Meltdown. Period.

Jim H, you’re right on with what you said, at least from my perspective. The mortgage company I’m with now is funding more each month, although be it mostly Conforming, but nevertheless, we’re still funding loans, profitably. The Real Estate Industry isn’t going anywhere and those of us who know how to ride these waves will survive.

In regards to John town, just because you have a Triple Decker Chocolate Fudge Cake doesn’t mean you eat the whole cake. Loan products are designed for certain types of borrowers and just because you have a product you can slam a borrower into, it doesn’t mean it’s the right product for your borrower. It’s called ethics. It’s called educating your borrower, and making sure they know what they’re getting into. It’s called “customer service.” A novel idea I know for many who came into the mortgage industry in the last 5-7 years. I’ve been doing counseling for a non-profit company instructing borrowers, who were never told what kind of loan they got into by their loan officer or broker, what their options are and educating them on the industry and it’s the loan officers job to make sure the product they sell is what the borrower can afford and understands. Option Arms were around long before the refi boom, but we sold them to borrowers who knew how to manage them, not to make 3 points on the back and give any jo schmo keys to a house he couldn’t afford.

In regards to the fraud issue, banks, brokers, mortgage bankers, guilty, guilty, guilty!

I believe in capitalism and all of us having the ability to make as much money as we can, as long as it’s done honestly, ethically, and doesn’t hurt anyone. It’s called responsible lending. This mortgage mess is no one’s fault and everyone’s fault. It’s years of bad practices, greed, and no regulation and monitoring that’s caused this mess. It is what it is………….

I am a mortgage banker in NJ. My office is 2 floors above B of A. Almost everyday I would check the posted rates at B of A. I would say that 99% of the time I could find a better deal for my client and still make 1.5YSP. As a matter of fact I could close the loan at B of A wholesale and beat B of A retail by a quarter point. Here is an idea, have every loan officer post a bond and if they commit fraud/lie they should lose their bond, pay a big fine and never be able to write a loan again!!!!!! Countrywide was and still is the biggest fraud in our industry. I have made a great living refinancing their pay-option arm to clients who should have never been placed in that type of loan!!!! instead of a 30 yr fixed motgages, only to be sold a piece of crap loan and Countrywide reps getting paid a ton. I am here to stay!!!! I have not been in a realtors office in over 8 years, all of my clients come from CPA’S, Financial planners , attorneys who trust that I will take great care of there clients!!!!!!! My clients are my best advertisment!!!!!! Repeat business!!!!!!! Sure I could have made more money, but I can go to sleep ay night knowing I did the right thing and that I will have clients knocking at my door for years to come because I am honest!!!!! Honesty has paid off for me and I am glad that most of the crap brokers will be gone!!! I will survive and make more money in the long run!!!

This article is so dead on. Former co-workers and I have been saying this for a long time and I am glad someone finally wrote the article. Writing “mortgage” on your resume is like writing curse words and that’s for job-seekers with college degrees! A recruiter told one of my ex-coworkers to take her mortgage job off of her resume! Take years of hard work off of her resume like it had never happened. She’d be better off saying she was a stay-at-home mom for the last 5 yrs.

I’ve worked with hundreds of brokers in Los Angeles and most of them were not crooks. People wanted these loans regardless of benefit. They didn’t care if the loan made absolutely no sense at all. They didn’t care if they had to go to the slimiest broker in the community–as long as their loan closed. And if one broker/lender refused to fund the deal, another one would have it doc’d and funded by the end of the week.

The reason we are in this mess is because the competition always found a way to show “willful blindness” to unethical (sometimes fraudulent) practices. The reason all of these homebuyers are upset is because they thought they would have more equity by now and they would do another refi. Unfortunately, many brokers and homebuyers didn’t know that lenders would change their guidelines and they would no longer qualify for their own homes anymore. No one thought it would
get this bad. If you say you did, you are either lying or psychic.

gee moe if your such a guru why cant you afford to move out of corona.
or is it you like the smell of horse manure when it rains?

Someone call me when everyone stops pretending that they were too stupid to think for themselves. I can’t even tell you how many times homebuyers have committed the fraud themselves. I worked for a Lender and I know the Brokers aren’t to blame here. And since, I didn’t write the guidelines, I am not either. We all played by the rules. All of us. I refuse to believe ALL of the homebuyers just aimlessly went by what BROKERS had to say. Come ON!

When others feel the end is near, the few take advantage of the moment. I am proud to be a mortgage banker!!!!! I can walk on any street in my town and hold my head up high. You know why???? I am honest, I always try and do what is best for my clients and I feel I am rewarded with refferals. A funny thing happens when you do the right thing, you get more business from happy clients.So to all who think the end is near for brokers , I say good bye!!!!!! I am proud of the fact that I do not have any loans that have defaulted…..because when I receive a loan that I know damm well is bullshit or the client cannot afford, I tell them to go away!!!!!! You will thank me in the future. Some took my advice and some wish they had!!!

Make LO pass a real test, get a bond, 24 hours of CE credits every 2 years and be held accountable for there actions!!!!! Retail included!!!!! The bullshit would stop!!!! If we are to be respected, we have to raise the standard/stakes of the people who orginate the loans.

I want B of A, Wamu, Countrywide and other lenders around!!!! They make me look good!!!!! I have better rates, service and put my clients in the proper loan program. I will be in the business for next 10-20 years, where as the Loan officer at the retail shops will be lucky to last a year!!!

Paul if the reputation of your industry is SO GREAT..why are most of you being Blacklisted when it come to finding new employment?

Most people surveyed today would NOT go to a mortgage broker because of the bad press…

So, really, how many loans are you actually closing today vs. 1 year ago?(Please do us a favor and not bs us on here instead look in the mirror when you ask the question? You need the answer more than we do.) And how many do you expect to close in 08? Not dead files that can’t go anywhere because the product isn’t available, the client has a bad score or they are underwater…business isn’t business unless it is a closed file.

Great financial people are invaluable at any price. What this article fails to note is that the liquidity crunch is being caused precisely because there is literally no mechanical difference in the way banks and brokers originate. Banks no longer fund there own paper: period. With negative savings rates where do you think the money would come from? Not from depositors: that is obvious. We are all beholden to the FCBs and giant retirement funds. A broker, at least, is not captive to a static funding model and can migrate rapidly. This reason alone, AGILITY, makes the survival of the broker much more likely than the survival of behemoth banks who have decked the halls with hanging corpses. The independent brokers are an army for hire and as logn as one bank hires them and treats them fairly they will slay the opposition. What I am seeing is that the indescriminate approval of brokers has been tightened quite a bit by the banks who will emerge as the next giants.

I am somewhat unique in that I am a mortgage originator who caters almost entirely to bank employees: loan officers, commercial bankers, actuaries and bank executives. Why do they use me if they can deliver a superior product to themselves? Do you think actuaries would settle for a subpar or inferior deal? If you think so then you don’t know what an actuary is. They use me because I offer superior pricing, service and product: period.

This misaimed article would make you assume its vast wisdom by pointing to the way in which securities brokers have been consumed and rendered moot by the large investment houses. Of course, that never happened either.

Matt and ANN yes it does hold true, look it up on their web site!!!

You prove you know nothing!!! Bank of America …30 year fixed 450k purchase 20% down,full doc,680 credit. 6.250% 30yr fixed 1,127 points! Everbank wholesale same deal 6.250% ..0 points 1.555ysp to broker!!! 30 day lock and yes I can close that loan in 10 days!!!Look it up!!! Which is better for your client???????? To pay 1.127% points or 0 point deal!

Our rep. sucks that is my point!!!!! Most of the brokers deserver to be blasted. I am no where near being a boiler room operation!!! Like I said…put up a bond, pass areal test, CE credits every 2 years and 1 strike and your gone!!!!!

Thats right most people would not go to broker because of bad press. Only people who took the time to educated themselves for the biggest purchase in thier life would seek out a broker who had their best interest in mind and not their wallets!!!! Smart people would ask there CPA, Attorney or CFP for a refferal!!!!!! Not some lame ass who would give them a option arm with a prepayment !!

Ann

I do not have many if at all dead files!!! I know right off the bat if I can close the loan or if I should close this loan!!!!! If a client comes in with a 600 Fico or lower, I ask my self if this person SHOULD be buying a home or enter into this transaction.I do not take pride in banging the crap of some financial challenged clients… 3-4 points. If you like to do shit loans you will only receive shit loans!!! If you surround yourself with quality people…..honest CPA’S CFP’S and attorney’s you will do very well even in tough times!!

LJ
I did consult a broker and a realtor. The realtor said, “Now is a good time to sell.” lol. The broker gave me his card and said if I found a property I liked – give him a call. I think the year before he gave up his job as a car salesman to becme a mortgage broker. In fact, I heard the mortgage broker bought several properties between 2004 and 2006, planned on flipping them but is now heading into bankruptcy! As for advice about selling too soon? I bought that property in 1975 for $100,000 and sold it for $400,000 so I have no complaints. Unlike most mortgage brokers, I’m not greedy. Want to know when prices will bottom? Easy. When 100x the average monthly rents in the area are reached. I have been renting since I sold. My rent is $1,800. Rents have risen slightly and are around $2,000 but going no higher. Why. One word. Affordability. People making $25,000 a year cannot afford expensive rents. A fact the mortgage brokers seemed to have left out when talking to the people they sucker punched. However, at the peak, the values for this sfh reached $725,000. They are now at $575,000 and sitting on the market. 100x the average rent means the true (and eventual) value of this house will settle somewhere around $250,000. Maybe $300,000. It’s going to happen and when it does I will go and see my bank manager. NOT a mortgage broker. My 2012 prediction is based on that as more and more people abandon property, inflation bites, stagnation take hold, wages are stuck and unemployment increases. It’s 100% baked into the cake. Want another indicator? Watch the charts of BZH and RYL and DH Horton on a monthly chart. When they start to move on the monthly, wait 3 months and if they are actually moving up as opposed to being in a dead cat bounce, it’s time to look. BUT, this is such a gigantic mess, property prices will take years to increase substantially once the bottom is reached.

Competition is a good thing!! Just think what rates and fee’s would be if there were only a hand full banks offering mortgages. Most certianly they would go up!!!!

Verdy, verdy interesting!!! Remember Schultz!!
I am the person quoted in the article above the 71 responses.
1) If the “big guys” were so smart about investing – Wall Street – then why are they writing down billions and billions of dollars? Hmmmmmm!!
2) I got out of the stock market and into cash on July 5, 07. and I am still in cash. I was an investment broker in the 80’s, have an MBA with honors and have been investing in the equities markets since I was 16. (My father started it all!)
3) Investors know there is a lot of money to be made in this industry. They will be back and the investors that are still here will stay here for the same reason. Get serious. People will continue to purchase real estate. People will need mortgages to purchase the real estate. A very god marketing system is in place to facilitate the process. The “money guys” know this. The mortgage banking and the mortgage broker industries will not be dismantled. Get on the other side of the table. If you were/are the “money guy”, what would you do?
4) Mortgage brokers will always out do the banks. As was mentioned earlier, they got the guts to go get the business. They don’t just sit there and wait for it. Oh, gee, give me a nice office and a, duh, salary, and pretend I know it all. Not!!!!
5) A past customer (really) came in my office late last week. He needs to refi his investment property, cash out, no escrows, pretty good credit. He decided to have me do his loan. He got a quote from COUNTRYWIDE, duh, at 6.5%. Oh, let’s see $7,000 in closing costs. For those bankers who don’t know the difference, this doesn’t include ESCROWS. I am charging him 1 point plus normal (real!!!) closing costs. Total cost to him – way less than 1/2 of COUNTRYWIDE’S quote. Oh, he knows I TELL THE TRUTH AND SHOWED HIM THE GFE! For those bankers who don’t know what that is, it is a Good Faith Estimate. Hmmm!!
6) Doing good, honest business pays. And, according to the numbers mentioned above, 60% of the mortgage community will still be here.
7) My office had a great November and December. Best in the past five years! (Gee, I keep records!) We anticipate January to be really good. Oh, I am FHA approved and have been for many years. Guess what we have coming. If ya think you’re gonna get approved FHA and close a lot of FHA loans, WRONG!! I promise I won’t tell those who don’t know the secret. (Do ya know what FHA loan doesn’t have mip?) I closed a loan for a bank person. This person has been at a local bank for 5 years now, 4 years when I helped her with her FHA loan. The mortgage person at that same local bank told her she could not get an FHA loan because SHE MADE TOO MUCH MONEY!!!!!!!!! Hmmmmmm1!!
Point made. They really don’t know what they’re doin!!! How in H… can a mortgage person tell a same bank employee she can not get an FHA loan because she makes too much money??????????????????? And this is my competition???????????!!!!!!!!!!!!!!!
9) Last week 8 people were sentenced after a 4 year FBI investigation. This is in a nearby relatively large town. Believe me, they’re goin after the “bad guys” and they’re getin ‘em.
(Enjoy the early English!)
10) As John Wayne would say “Well, Pilgrim”!!
11) There is a big market developing out there. All ya good guys, hang in there. This country needs you. The bad guys are gettin out ’cause there ain’t big bucks in it any more. That’s ok. There is a good, honest living in it and that’s why I’m a stayin’. If it ends, so be it.
12) I told my kids as they were growin’ up, “ya gotta stick together-help each other”. It’s like the pioneers headin’ West. When the Injuns were comin’ over the ridge, “Farm a circle the wagons”. So what is different today? Nothing! So all you positive, creative, energetic, hard workin’ loan officers, stick together. The fight has just begun. Our ancestors got through the Great Depression and we will get thru this. Remember the best way out of trouble is through it. Hmmmmm!!! (A former President of the United States went to England, smoked pot and got out of the draft!!!) Hmmmmmmmm!!!! Guess who’s runnin’ for President now!!!!!!!! By the way, I served in the UNITED STATES AIR FORCE for 4 years! And I was stationed in Pakistan!!!!! Hmmmmmmmm!!!
13) Summary – I hope this gets the blood runnin’. I hope this gives hope to a bunch of the “good guys”. I hope this pisses off a bunch of the “other guys”.

Broker or Banker, which is worse? Neither. Fraud can take place any where, at any time, by Broker or Banker. In Washington, I was a Broker for 9 years, but switched to a Bank job to weather the storm. As a WA Broker, you have to get a Loan Originator license. Working for a Bank, no license required. I think to make it fair, all Loan Officers need to be Federally Licensed and Bonded. Finger printed, thorough back ground check, the whole nine yards. Also, 20-30 hours/year of Continuing Ed should be required to originate any type of mortgage. Rebate/Overage should be limited to .25 – .50% to the L.O., the rest to the borrower.
To make additional income for an L.O., you get a “Residual Income” for a perfectly performing mortgage. This forces Loan Officers to orignate good, fair loans. When the loan pays well, the LO gets a bonus each year. Plus this would keep LO’s in touch with their clients to make sure the are paying on time, or if another sales opportunity is there due to changes for the borrower. This could be a win/win.

You brokers kill me. You make it sound like you are truly helping people. What a crock of crap. Would you help a dope addict obtain his dope at any cost? FBs and speculators all overstretched their true buying capacity. When you have people making 25k to 50k buying 500k and 600k homes you are not helping them. There is no subprime loan on earth that these people should qualify for. Just because it exists doesnt mean you throw your client to the sharks. Not just a few places were doing this almost every brokerage whore house was is on this.

No, I dont have sympathy for any brokers. Sure there were hard working honest people but if they were out buying themselves 600k houses and mercedes and not saving then they deserve what they are getting now. This isnt going to get any better for them in the next year, year after or the year after that. Look at telecom, many of the people making huge amounts of money no longer exist. There are some but the industry as a whole has changed nearly 8 years later and the people that are left are making less.

Mark:
You quit. You left the mortgage brokerage business!! And now you give instruction as to regulation!! What’s wrong with you? Mortgage brokers work on commission. And from your non-broker positon you hand down income/revenue restrictios!! Oh well!! Russia, here we come!!!!!

The wholesale lenders created the products.
The brokers sold them.
The customers bought them.
The lenders packaged the loans.
They sold them to investors.
Too many homes were built.
The cost of housing got too high.
Housing crashed.
Lenders crashed.
Brokers crashed.
People are crashing.
The economy is crashing.
The world is crashing.
The party is over.
Time to get real.
Time to adjust.
Time to pray.
Time to spend more time with family and friends.
Time for new hope.
Time to be happy we are still alive.
Time to love.
Time to forgive.
Time to move on.
Time to survive! And we will.

Well said, Jariah

Carpenter:
You have more than bathroom time to respond. Apparently you “Got no facts”!!!

Earn it?
LO’s at banks get a salary, not a commission. And we are talking about this country, not other countries.
I earn it. That may disappoint you. There is a lot of work to this business when ya don’t just sit behind a desk in a fancy office (which ya don’t pay for!!)
Clearly, you have no idea of the word risk!!!!

Aaron,

Well put. You’re just the type of over-charging greedhead broker the article is about. Just because the GFE dollar cost to the borrower from you is less than from a banker doesn’t mean a thing, especially when you’re getting them a higher interest rate to make your YSP. It’s noob hacks like you that have ruined this industry. Since I started in this business in 1984, I’ve held management positions in retail, wholesale and correspondent for many of the major lenders such as Norwest, Countrywide and Weyerhauser, and I’ll let you in on a little secret: up until 1998, the brokers were , in large part, considered a valued and trusted business partner and a peer. Then the Alt-A and subprime loans really started hitting their stride. After that time, you’ve been nothing more than a necessary evil and a liability. Countrywide uses their brokers and correspondents to get huge monthly volumes without staffing and brick and mortar costs. The worst of it is that brokers like you have no fiduciary responsibility back to the wholesalers. When your loans go belly-up, there are no buy-back provisions as there are with licensed bankers that broker out. Mortgage brokering has turned into a money making proposition for uneducated cheats and slackers who are out to make a fast buck by doing refi churns and packing loans with high rates and YSP’s. You fit that role to a tee…you mention your fabulous monthly income for so little work, you clearly state how you jack up the YSP for your exclusive benefit, and your grammar is abhorrent. Brokers were always viewed by the wholesalers as a means to an end. Your end is near.

Joe, Know the difference between risk and risk management.

Mark:
I do know. I understand risk. I understand risk management. I’m still here – profitable, bills paid to date, business plan written for next year for all three companies, etc. Remember, I got out of the stock market in July. I predicted the market would go to 12000. It his 12,500 2 weeks after I got out. I am still out. Risk management??? Preservation of capital??? He who loses the least in this game and this market and markets like this, wins!!!! Risk management!!

Hey, ya all! (not bad for a non-Southerner!!) I gotta a radio show tomorrow mornin’. Gott a script to write and sleep to get.

Have a good one! Remember the pioneers! I can’t imagine three months from St. Louie to California in a little covered wagon. And we think we got it rough!! How did they do it?

I disagree that retail LO are force to do more legal things that brokers, becuase if the LO does something and the loan doesn’t perform and fruad was the cause he will be fired or possible jail time. If the broker commits fraud he/she show be responsible to buy back the loan. Now in 08 the banks will get stricter and go after the brokers. The bottom line is theat people go to brokers, because he don’t qualify for the loan at the bank. The broker will alter documents to make the deal work, not to help the customer, but to make a big comission. I have been in this business for over 25 years and this time it will take 2 years to recover from this mess. I see everyone working for the banks retail in the future with no middleman. If the investor are not buying the loans, why would the big banks are going to take any risk in third party originators. The party is over for all the broker who let the money go to thier head. Buying million dollar homes, driving Bentley’s,Ferrari’s & $200 lunch is sad.

Here’s a word from a sucker who paid a broker a couple of years ago to refi in a interest-only loan fixed for 5 yrs. I paid more in closing costs than my parents paid for their whole house (it was 1959 but you get my point). I think broker fees, real estate commissions and all the rest of it are just another way of ripping off people who actually work for a living. I read some brokers were pulling in $2m a year. For what? Doing some paperwork? Of course, you folks probably aren’t as bad as the big time crooks running the banks and hedge funds on Wall Street. And oh by the way, I fully expect to end up in foreclosure like all the rest of the suckers. Thanks for nothing. Hope you all starve.

CA Sucker I am sorry for you but why did you sign the loan with so many fees. I suspect it was pressure from your RE Agent and the seller who was going to let the purchase agreement expire if you didnt sign. Am I right? I’m sure title was so damn busy that they didnt really ever explain any of the papers to you but its up to you to understand and what about your Agent didnt they look out for your best interest? That was a part of their duty after all. Your RE Agent made a 3% commission and in CA what was that? 15k? More?? It sounds like a dog with a note in its mouth could have done your Realtor’s job and yet you place the blame with us? I am truly sorry but I’m sure in retrospect you wish that you had walked away and let the PA expire. Best of luck to you…truely.

Top Producer- I dont know what to tell you, alot of us are in your same boat. Just focus on helping people and stop focusing on the money you need, help enough families and God will handle the details.

” Things may come to those who wait, but only the things left by those who hustle”
Abraham Lincoln

I worked at Ameriquest Mortgage, I know I am the devil, but i thought it was intersting when I met with the Execs after the 360 mil settlement they were saying while sitting down with the AG of each state they made every effort to make brokers look bad. YSP was the devil and they claimed in 2 years brokers would be out of business. I am not predicting anything this is what was said to me over 2 years ago.

Alan! I was looking for you! Same spiel, different forum! There you go, lumping an entire industry into one sweeping generalization. And you are still thowing out statistics based on what? Alan: you are speaking about predatory lending practices perpetrated by some, not all, a majority of which occurred in the sub-prime arena. The cause of this crisis is due to many factors and I believe that anyone with a brain will agree regulation reform is in order. Whether or not the mortgage broker will survive is still up in the air. I hope they do because the career oriented, professional, educated, moral, ethical mortgage brokers provide an inavaluable service to the consumer. They provide competition with the banks so the consumer does not have to run from bank to bank to bank to shop for a home loan.

Alan- Good post very intelligent. However, to what degree do you remove the \’e2\’80\’9cmiddle-men\’e2\’80\’9d? If you take the Mortgage Brokers out of the picture then the lender becomes the \’e2\’80\’9cmiddle-man\’e2\’80\’9d if you take the lender out then the Investor becomes the \’e2\’80\’9cmiddle-man\’e2\’80\’9d and the investor does not have the time or the desire to facilitate (even if they chose to the cost would be much the same as it is now) If you could somehow remove all the \’e2\’80\’9cfrictional costs\’e2\’80\’9d you would simply end up with virtually no competition and no delivery method

As far as automation\’e2\’80\’a6yes agreed it is changing the industry but it is still the \’e2\’80\’9cmiddle-men\’e2\’80\’9d who are automating and not the \’e2\’80\’9cInvestor\’e2\’80\’9d

Alan I am sorry but presently this whole country is nothing but a whole network of \’e2\’80\’9cmiddle-men\’e2\’80\’9d working in concert to redistribute the wealth of this country to what was once the third world. We really don\’e2\’80\’99t produce anything anymore\’e2\’80\’a6we just buy.

Virginia,

I’m putting down number of 90% based on appraiser survey where 90% of appraisers mentioned that WERE PUSHED by LOs to inflate the value threatened with suspension of future business if number is not hit. From there I extrapolate that 90% of transactions involved dishonest cheaters if not outright criminal LOs as originators. Need I go further ?

http://latimesblogs.latimes.com/laland/2007/04/mortgage_fraud_.html

As far as banks: if they sell loans to FNMA/FHLC/secondary market I see that type of activity no different from LOs. It’s same thing and it will be extinct. I wouldn’t be surprised if DU is opened up to consumer one day, especially for loans without risk layering, you know those 58% of originations that are 20%+ down, 720+ FICO, fixed rates ones. I can’t find a value for brokering of that loan even with microscope.

Banks will be doing portfolio loans or some niche secondary market programs.

BTW, make no mistake, Wall St peddlers are no less (much more I would say) middlemanish with all the dark sides of human nature that it brings to light. Stock brokering no longer cash cow it was so Wall St invents new types of transactions to facilitate and to be paid on doing so. The problem though they must constantly come up with new ways to fleece the sheep because sheep are not that stupid. IPOs transactions are dead after dot com bubble, at least in US (btw IPOs were hyped and facilitated by the same middleman). Sensitization is going to be dead after global ABCP, MBS, ABS market seizures. Would be interesting to see what would be next great thing for Wall St peddlers. For those LOs watch and if you want to make the same careless living do what they do.

CTAN,

Middleman are like oil, you do need certain quantity in the economic engine. Put too little or too much and engine will be dead. The problem in US as you properly noted we are no longer incentivized to produce, create and do other productive things. Instead a lot, and I mean a lot of smart folks who otherwise might be doing great things go into facilitator roles. Engine’s displacement is getting smaller and amount of oil is getting larger. It’s not healthy, engine will sputter. It will hit us hard and we will go back to be creative nation that we were until then broker away.

Virginia,

It was National Appraisal Survey 2007, unfortunately they are asking money for the copy. http://www.octoberresearch.com/studies/nas2007/

You appear to be positioned in that non-commodity niche just like travel agent who arranges Serengeti safari tours (you can’t book it on expedia you know). As long as your service is not commodity you should be fine however given that competition is going to increase (there will be more hungry brokers) your margins may sag a little but again if you are the best to book Serengeti safari with you should survive long term.

CA Sucker: When did you do this refinance? A 5-year fixed-rate @ 4.75% is a pretty darn good rate. I haven’t seen that rate in quite a while. $19,000 is extremely excessive in closing costs UNLESS you bought down the rate. I closed a 5-1 ARM (fully amortizing) in July 07 for 5.375% and the discount points were 3%. What was your loan amount? Are you paying interest-only or fully amortized? Did you take cash out in the transaction? What were your total origination and discount fees-points paid to buy-down the interest rate (separate from the third party fees)? Any loan officer can tell you quickly whether or not you got a good deal re: closing costs with the information requested above. Depending on the loan amount, the broker/bank making a net 1-1.25% points is reasonable (this does not include discount points but does include origination fee and yield spread premiums).

No one can predict the future but hopefully the CA real estate market will rebound and you can still sell and retire in 2010. I don’t know what area of CA you live in but major metropolitan areas and suburbs are usually more insolated against major downturns in value. Marketing times have increased substantially. What used to take 3 days to sell is now taking 6-9 months. Our real estate markets have always bounced back…..Please don’t lump all industry professionals into one category. Most of the people remaining are doing a good job and are watching out for the client.

Virginia. . .
The loan amount was $417k for the refi with a little cash out (less than $20k). I don’t have access to the paperwork right now, but I do recall there was a buydown to the 4.75% interest-only rate for the 5 yrs. If the buydown was 2 or 3% that could have amounted to most of the $19k, making the cost reasonable. I don’t know. I guess I’m just venting since after 25 years of owning a home in California, I think we’ll be renters again within a couple of years, probably permanently. Of course we won’[t be alone. I work with a woman with four kids who’s upside down and making the lowest payment on her option
ARM. She’s toast and she’s got nowhere to go. It’s obvious there is a lot of soul-searching going on in your industry in the wake of what is truly a disaster for a lot of people, including those who maybe shouldn’t have agreed to subprime loans they didn’t understand. One thing is certain: a lot of money was made all the way all the way from the top (with the derivatives being sliced up and sold over and over again) down to the level of the brokers and realtors. It’s especially galling when we read that some hedge fund managers, for example, had personal compensation last year in excess of a billion dollars. It’s crazy. But again that’s another story. Good luck to the mortgage people who actually provide a decent service at a fair cost to the client(whatever that might be).

Virginia. . .
Okay, thanks. I’ll leave you folks alone now.

This whole post is just hillarious. In 2000-2001 the Nasdaq fell apart and I heard people speak of “the end of the tech stocks”. Funny how just a few years later the stock that started it all Amazon.com is making new highs. Yes things will probably not get this crazy again for 20 or 30 years, but the broker industry will muddle throught this as will the retail. Ultimately the fat cats who should really be worried are middle management in the retail channel as they are “not necessary” and will be eliminated. Also to be extremely worried are overpaid underwriters, processers, marketing coordinators and anyone else who is not actaully bringing in revenue to the table. I 100% agree there are some bad actors who are brokers, however after looking at several outrageous “stated” loans which were approved by a local bank YES RETAIL all they way. Subsequently the local paper spoke of their 25 million in buybacks locally.(this is a publicly traded company as well, so this proves that brokers don’t share all the blame. Ultimately the problems created are associated with Greed and the market as a whole which include realtors who pressured their RETAIL loan officers, appraiser who did not have the guts to simply not massage the appraisal, loan officers both retail and broker who refused to just say no and deny loans that did not make sense, and lenders who underwriting in my opinion turned a blind eye to obvious embellishment of income, and last but not least borrowers who had no intention of every repaying any of these loans as they were just an ATM. Face it, Capital chases return and quick buck artists come and go with every bull market in any industry. There is enough business for anyone who wants to work hard and do their job. Question is who will stick it out and prospect enough to make a living. Working in the broker world I can definately say that margins will compress as the public has more price discovery, but this will not be isolated to brokers alone. Retail will feel the pinch as well. Personally I can’t think of a better time to be a broker. Retail will try desperately to sell loans priced way too high claiming all brokers are dishonest and they could not possibly do the loan at a rate this low. The good credit consumers who can still get approved will go to brokers. Like it or not people will always deal with brokers who are sophisticated and have lower cost. The one thing no one wants to admit is that price is still the number one factor once a person finds loan officers they can trust. Service should be expected and low cost providers will always have a space. Good luck to all that read this post and please focus more on the opportunity to gain new clients and less on bashing other professionals.

Aaron, get your head out of the sand. Hopefully your approach to the 18th green is more precise then your approach to fully understanding how the lending world works.

I haven’t read each comment but i will throw in my two sense. There are alot of large banking institutions looking at the B of A model. Remove themselves from the wholesale market, origninate, process and underwriter all there own paper. We all agree that their are a large number of highly qualified respectable mortgage originators out there looking for jobs. If B of A is successful, and i think they will be, i would venture to say that the other big boys would follow. This would run the brokers out. The ones who have positioned themselves as mortgage bankers with good LO’s, processors, underwriters and closers would scoop up the good brokers and then inturn sell directly to Fannie or Freddie. Like it or not there are going to be some extreme changes in our field over the next 2 yrs.

Hey Aaron, if I’m wrong the next round is on me….

All pretty obvious points made by all, but you missed one huge point! G.S.E.\’e2\’80\’99s (Government Sponsored Enterprise). Only Brokers will be able to feed theses beastly companies in the future. Fannie, Freddie and Sallie need brokers more than banks. And for most of you who don\’e2\’80\’99t now theses government sponsored loans are much better loans and can help a wide range of borrowers. After any crisis in this country we all look to Uncle Sam. Fannie and friends will help American home owners and good American Mortgage Brokers.

cream alway’s rise’s to the top. i’ve been a owner operator of a small mortgage company for 11 yrs. yes it has been an eye opener this year but i see oportunity. short term hard money is alive and well and will pick up allot of steam in 08. over the years i have learned that winners are simply willing to do what loosers won’t.

Broker: “You want answers?”
Borrower: “I think we are entitled to them!”
Broker: “You want answers?!”
Borrower: “I want the truth!”
Broker: “You can’t handle the truth!!!” (continuing): “Son, we live in a world that requires revenue. And that revenue must be brought in by people with elite skills. Who’s going to find it? You? You, Mr. Finance? We have a greater responsibility than you can possibly fathom. You scoff at sales divisions and you curse our lucrative incentives. You have that luxury. You have the luxury of not knowing what we know: that while the cost of business results are excessive, it brings in revenue. And my very existence, while grotesque and incomprehensible to you, drives REVENUE! You don’t want to know the truth because deep down in places you don’t talk about at staff meetings … you want me on that call. You NEED me on that call!
We use words like Volume Rebates, Co-op , discounts, buy backs, cost adjustments, purchase agreements. We use these words as the backbone of a life spent negotiating something. You use them as a punch line! I have neither the time nor inclination to explain myself to people who rise and sleep under the very blanket of revenue I provide and then question the manner in which I provide it. I would rather you just said “thank you” and went on your way. Otherwise I suggest you pick up a phone and make some sales calls. Either way, I don’t give a damn what you think you’re entitled to!”

Joe said: There was and always will be some people doing fraud in the mortgage industry, just like there always has been, but that is no different then say bad writers who write ridicules articles based on no merit or facts, but as just a way to put there name out there for the sake of vanity.

There has always been:

Child molestors.
Drug trafficing.
Child sex trafficing – - so what???? Do nothing about it?????

When I have a cut, if I don’t attend to it, it becomes infected and festers and soon, I might be at risk of losing a limb.

The mortgage industry has become infected with the greed of fraud and it’s gotten this bad so that we can DO SOMETHING ABOUT IT. To point to the infected Energy industry might be a valid point but it doesn’t take away from the NEED to do something about THIS INDUSTRY right now!

I have been a broker for over ten years, last December(2006) I took a job with the then fourth larger mortgage lender in U.S. and I was there 60 days, I HAD to leave once I saw how crooked they were running the game, NO GFEs issued, insisting you lie to customers about rates until close but MOST of all—–their insistence that we put AT LEAST 4 POINTS UPFRONT ON ALL LOANS to balance out on some “chart” they had, ANTHING less than 4 points upfront had to be approved by HQ?!? THIS WAS THE RETAIL SIDE and I never want to be associated with it again, Brokers will survive and prosper if this is our competition.

Joe (the RE/MAX owner and old school mortgage broker) – it looks like you have good plan and should do just fine. good luck!

MLmortgageguy. I didn’t read you as suggesting that no fraud was created. I read you, I think correctly, stating that because there was massive fraud everywhere and always has been it makes no sense to concentrate on the fraud of the Mortgage Brokers.

As I said, pointing the finger mentality, MLmortgageguy. Yes, the Wall Street investors made a killing, yes the banks made a killing, yes the client has responsibility but this article in particular is about the responsibility of the Mortgage Broker and how the fraud and the behavior of a lot of Mortgage Broker’s and the ensuing crisis will affect THEIR industry in the near future.

You say: “Gotta look in the mirror.” I love it. When oh when will Mortgage Brokers like you start doing that?

You know, reading responses from people like MikeJacob is refreshing.

I very rarly read a former or present Mortgage Broker say, Yes, I committed fraud and worst or I witnessed fraud and worst. I feel like crap about it and I’m ready to admit that many of my other colleagues did the same. This industry needs to be regulated and monitored.

Because after all, isn’t that the plain truth?

I didn’t catch this earlier;

Joe
December 27th, 2007 at 7:59 pm
65
gee moe if your such a guru why cant you afford to move out of corona.
or is it you like the smell of horse manure when it rains?
===============================

Your guess is right. I like the smell of horse manure even if it doesn’t rain. I own a 150 acre ranch with 25 pure bred Arabian Horses in the Norco Hidden Valley.

Blogging sure does pay well…………………………………..

From Art Of War…” HE WHO CONTROLS THE GOLD..CONTROLS THE LAND” big banks and wall street controls the gold right and probably forever so they can do what ever it is for them to survive and be in control. I dont really care if broker survive or retail is going to do better, this article is just saying be careful and have a backup plan. As human beings we dont like or want to see othe human beings lose their house or have a bad time financially. Just be safe and becareful because things doenst look like it will get better anytime soon.

Maybe we should start coming up with ideas to fix and prevent the mess rather than fight about who started it.

1) Higher barriers to entry into the field.
2) Bonds and backgrounds on ALL (bank and broker, CFL, net branch etc etc etc) employees.
3) More in Depth mandatory C/E requirements

any more suggestions???

Dear Moe, how long have you been in the mortgage business??

Level the playing field. All LO’s need a standardized license to originate mortgages. Hold the bad Bankers, Brokers, LO’s accountable by enforcing (or at least theatening) mortgage buy backs for verifiable loan fraud. Give the Broker, Banker, LO a annual bonus for the loans they originate and perform well.

Jacmac,
fraud is everywhere in the industry…i’ve witnessed it first hand, in the first mtg. shop i worked in, and I saw the celebration that followed when the lo felt he got one over, and needless to say, that shop is out of business…but i digress, fraud is on ALL levels in the industry…is my industry in trouble, hell yeah it is…what next year holds nobody knows…does the industry need to be regulated? hell yes it does, but those in charge need to do a better job of regulating the laws that are already in place…adding more is like trying to put more band aids on an amputated limb…just aint gonna help.
enforce what’s in place, make loan officers have to get licensed, i’ve got no problem with that. bottom line is, brokers have not completely, single handedly, create the TRILLION DOLLAR global economic meltdown, and to suggest so is ridiculous!!!

And Mark..paying an LO anything that is not set out before hand in the HUD will never happen…sorry there is this nasty little thing called RESPA that gets in the way.

Paul: “Make LO pass a real test, get a bond, 24 hours of CE credits every 2 years and be held accountable for there actions!!!!! Retail included!!!!!”

Other Mortgage Brokers who are not interested in pointing fingers but can offer solutions, what do you say?

Thanks Virginia and everyone else who made this a very insightful debate. Without you all, I would be blogging alone

I wish everyone the best in 08′ and Happy New Year!

JacMac- You seem to be under the impression that nothing has been or is being done to regulate the industry. I really don\’e2\’80\’99t think it is the argument of anyone here that Mortgage Brokers are pure as the driven snow.

It seems to me that all you have done in this post is rip poster’s comments (probably mostly out of context) and then make remarks to the effect of “but something still needs to be done” “the industry is sick” “the industry needs to be regulated” OK I GET IT your not a happy camper.

You seem intelligent enough here is a good quote from you-

“There is nothing wrong with making money. Let\’e2\’80\’99s all make as much as we can. But there is something wrong with hurting people and ruining the lives of families and children. There is something very wrong with fraud.”

Are you really under the impression that in order for a home loan to be done it requires that fraud be committed? Do you really think that all Loan Officers are criminals who are out to do what ever it takes to make a quick buck? I have to wonder where your getting that from, I figure that either
1.\tab You have personal knowledge of LO\’e2\’80\’99s committing fraud.
2.\tab You don\’e2\’80\’99t actually have any personal experience on the subject and are actually just repeating what other people say. (And you should just go away)

You see JacMac if you ask a thief if everyone steals he will tell you that yes everyone is a crook, if you ask a liar if everyone lies he will tell you that truly nobody can be trusted. If you ask a Sub-Prime underwriter they will tell you that all loan is fraud and that LO\’e2\’80\’99s are morons. If you ask a sub-prime AE he will tell you that LO\’e2\’80\’99s are Liar\’e2\’80\’99s and that the investor knows what he is buying. But JacMac if you step outside that little sub-circle of business and get away from the lunatic fringe, you will find that there really are allot of very good, morally straight Loan Officers working for banks or if they are really good at what they do they work for Brokers. In fact the vast majority of loans that are done in this country are done without fraud and done by LO\’e2\’80\’99s that are not thieves.

Now earlier you ripped a quote from me when I stated
\’e2\’80\’9cEverybody keeps blaming the brokers\’e2\’80\’a6.We\’e2\’80\’99re just selling the banks stupid loan product (FIGURE IT OUT!!!) \’e2\’80\’9d

What do you suppose I meant by that? I\’e2\’80\’99ll bet you didn\’e2\’80\’99t even try to read it in context in fact you where probably just skimming the article looking for quotes with which to prove your point.

Well I apologize if I was not clear the sentence immediately preceding the one you used was this
\’e2\’80\’9cWhen I said Banks in my earlier post I wasn\’e2\’80\’99t really referring to \’e2\’80\’9cBofA, Wells Fargo, Chase and the rest of their ilk but for every bank you can name that is above reproach, I can give you fifty that are rotten to the core\’e2\’80\’9d
What I am trying to convey here is that the real problem that we are having in the industry is not the brokers but rather the loan product itself. If a borrower goes out and gets into an Option ARM, it is a mistake and it does not matter where they get the loan its just a bad deal. A Sub-Prime 2/28 or 3/27 is just not a very good loan product it is designed to force the borrower to refinance after the fixed portion of the term (the bank simply does not want the borrower on their books for more than two of three years)

Now that being said, a first time home buyer with a 600 score that can\’e2\’80\’99t prove income, assets or that they have even made rent payment in the past should have never been given a mortgage. So is it the broker\’e2\’80\’99s fault for offering it or the banks fault for creating the product?

Do LO\’e2\’80\’99s need to be licensed? Yes I have always felt we should be required to be licensed, CE classes, E & O, the whole bit, but should we have a fiduciary responsibility to our borrower? Why do you suppose that in HR 3915 it expressly states that the new licensing requirement of LO\’e2\’80\’99s is not to extend to that of a fiduciary responsibility. I\’e2\’80\’99ll tell you why-
1.\tab Banks don\’e2\’80\’99t want a client/agent relationship (that shows you what the bank really thinks of its customers)
2.\tab Closing costs would go through the roof. If you expect Brokers/Bankers to originate loans for which they are legally liable, you had better be prepared to pay more than 2 points.
As far as loan fraud in the current market? It is virtually non-existant. Sub-prime loans are gone and will never return (HR 3915 make this a certainty). Most all loans are Full Doc, not stated. The only thing that really mystifies me is that damned Option ARM, I think its still out there (I really don\’e2\’80\’99t know, I\’e2\’80\’99ve never used it).

So as far as your opinion that the industry is sick and that nothing is being done to disinfect this festering wound called the mortgage industry, I have great news for you\’e2\’80\’a6.. You\’e2\’80\’99re Wrong.

To me there is plenty of blame to go around…LO, banks, shitty loan programs,Wall Stret,rating agencies…….and so on!!!!

It is up to the true mortgage professionals to change/demand the way we do business. We must demnd higher indusrty standards to orignate loans….testing, education,bonding, E&O, enforce laws already one the books, and now the BIG ONE…. EVERY NEW LOAN OFFICER MUST COMPLETE A 2 year training/apprentice/internship under a senior loan officer before your can obtain your license!!!! If you want to get into this business you must pay your dues and show that you really give a shit and this will be your profession!!!(not quick money) RETAIL INCLUDED!!!!

Raise the bar and kick the scum to the curb!!!!!! I love what I do and demand a higher standard!!!!!

Ahh, the question of the day for many, will Mortgage Brokers survive ? The answer isn’t so complicated, just as Mortgage Brokers had very little to do with their previous success, they will have very little to do with weather they survive or not. Those who offer wholesale lending channels will access the situation, and decide weather to turn it off, or continue. One thing is clear, the writing has been on the wall for many years, this “mortgage meltdow” has only created a reason to excellerate the decision that some Big Bankers have alreday begun to excersise, and that is to turn off the wholesale lending machine, as in most business climates, it’s only a matter of time. Mortgage Brokers, it’s time to seriously look at the reality of all this.

Yes, some banks have cut brokers but wholesale lending will still be around in some form. I have a office in NJ and I have big banks who have cut off wholesale only to be contacted by the same banks “Private Banking Group” looking for loans. What they want are loans over 500k to 3 million good credit (680) good assets, can be stated( but job,assets, are realistic) strong LTV.

I do believe if you have quality full doc A paper loans that there will be a market for it. Banks cannot handle the business now, 2-4 months to close! Go ahead and call Citibank retail, they answer in India!!!!No competitation will only make the problem worse!!!! Some of the lenders who have stopped there wholesale channel were/are the biggest fraud players…that is just the facts!!!!! Selling option arms, fast and easy program to the guy who pumps gas. Everyone is to blame including the big banks!!!!

There will always be a market for high quality loans, no good business would turn them away!!! It will be a tough couple of years but the strong will survive.

At least if LO Were held higher standard the investors, bond rating groups, underwritters could not point the finger at brokers. BROKERS DID NOT PACKAGE A PAPER LOANS WITH CRAP LOANS AND SELL THEM OFF TO INVESTORS FOR HIGHER RETURNS!!!!!!!! BOND AGENICES RATED,THEM INVESTORS BOUGHT THEM, HOW IS THIS BROKERS FAULT!! Shit flows down hill and brokers are at the bottom of that hill!!!

At least if LO Were held higher standard the investors, bond rating groups, underwritters could not point the finger at brokers. — Exactly Paul, I agree.

Mortgage professionals wouldn’t have to point fingers if they were doing what they were supposed to do — then they’d have standing to be outraged and unwilling to take blame for this fiasco.

MLMortgageguy you asked: “one question for you\’e2\’80\’a6how is forcing lo\’e2\’80\’99s to get licensed, and whatever else you want them to do, how is that going to change the way mortgages are underwritten, approved, securitized and sold to investors?”

MLMortgageguy — you’re the seasoned industry professional and you ask me, a layman such a question?

It seems like you’re just trying to show me up as being ignorant to the way this industry works — admitted, I’m ignorant to the way this industry works.

But licensing, as one of the suggestions, sounded good to me. I think it can make a difference. A person who has to be licensed to practice their profession and is held to certain standards for fear of losing such license, who faces the risk of losing substantial income, because of being barred from practice their profession without such license, will then in turn behave in such a way as to preserve such lisence and will uphold their fiduciary duty to the client so as not to be held up to censure or be submitted to a hearing for license revocation.

Now that won’t deter all fraud but it will help.

Loan Officers who work in a broker environment are already required to be licensed and pass the required classes and test and then continuing education each year. It is the banks that are allowed to hire unlicensed, unseasoned, uneducated people off the street to sell their loans.

I agree with an earlier post re: a minimum internship (he proposed 2 years, I say 3 years) and more indepth training and education for ANY person selling a real estate loan, whether a loan broker or a bank.

Banks and mortgage bankers are not required to license their loan officers. My post read: loan officers who work in a broker enveironment” Mortgage brokers are required to be licensed in most states. I am not a compliance expert but my many years of experience tells me that as a general rule, mortgage brokers do have to be licensed.

Jacmac & Paul — you are correct in your opinions in favor of licensing … however … it may be too little too late for the industry now … i just read a post stating that the state of Massacusetts has in effect banned YSP as a way for brokers to be compensated effective January 2nd … in response to this Wells Fargo is designing a flat fee compensation program for brokers … while IndyMac has pulled out of the state … in effect … the end of the mortgage broker business segment in that state as all lenders either go to the Wells form of compensation which will not adequately provide the necessary compensation for a broker to operate a business or the wholesale lenders will simply exit the state … it is reasonable to believe that many of the other state attorney generals will follow Massachusets lead on this matter … and as one by one the states eliminate YSP then so will the viability of operating a profitable mortgage brokerage be eliminated.

I think in the long run if Wells and other banks stop paying YSP it will be bad for consumers. They will be the only game it town and that is not good. When Wells closes a loan they DO NOT have to disclose how much money they are getting paid for delivering the loan.THEY ARE NOT DOING IT FOR FREE!!!! I think this is a bad idea. Every bank, broker or whoever should have to disclose what they are getting paid…fair to all!! EQUAL PLAYING FIELD FOR ALL!!! I feel there is money to be made in wholesaling loans and some new players will emerge and some old will be around.

Like I said in a early post…I have been closed off to some lenders via wholesale…only to be contacted by the same banks “Private Banking” looking for high quality loans!!

I am Republican, a proud member of the vast right wing conspiracy and I believe in corporations I believe they should make money and as much as they can.

I am starting to doubt my beliefs.

I have been in the mortgage business for 20 years. I have seen just about everything. Here are my thoughts on lending

*Government talks about economy and growth. People have very little ‘extra’ money to take care of things so they ‘borrow’ The consumer(so) own about 1.9 trillion in credit. The economy grows doesn’t show how much ‘borrowing’ attributes to that. Is it real growth or is it growth based on ‘borrowing’?

*Lender-lending has become abusive from payday lending, auto loans, finance companies, credit cars(late fee’s and over limit fee’s, high interest rates, NSF fee’s to the tune of 18 billion per year, atm fee’s, check by phone fee’s, late fee’s

Corporation have been abusive to the consumers. They have gouged and raped them with anything slight deviation from the contract. They pounce on you to extract more money.

Lending has become a multi trillion dollar business and every lending institution has devised every single possibility to set up triggers to get more money. And often times the consumer doesn’t even know it. A bank will sometimes create a way to post your checks to trigger you to become over draft and generate NSF fee’s

Predatory lending is throughout the lending and banking institutions and I find it horrible that the consumers are straddled with so much debt that the consumers and totally stressed out with how much they owe and how much it cost to survive.

So many lenders grant loans without any real consideration to ability to repay. I bought a car and they never asked me for paystubs. They relied entirely on my credit score. I could certainly afford the loan but how many people go through the assembly line and if the customer has a 650 score they can buy just about any car and the lender doesn’t even do a real budget analyses. Wow…

I called in my mortgage payment they want to charge $20 convenience fee. So I went online to pay and they want to charge $20 convenience fee.

Lending today has gotten out of control because the lenders don’t care if you can pay. They just look at the bottomed line and will continue doing this until they start taking real hits.

I will certainly will never be no Democrat — but the Republicans are not the answer to this countries problems either.

People are not losing their homes because of YSP’s. They are losing their home because of the products and the inability to continue paying for a loan they wanted in the begining but now can’t afford. Having the L.O. lose the ability to have a YSP will now without a doubt affect the the borrower’s closing cost. Remember, these are clients that can’t get bank financing. However, banks who get a YSP every loan they originate have the luxury of not calling it anything. Wells Fargo is making this big YSP statement in MA but does that same statment to their retail or bank which also does loans? Probably not.

CTAN

YOU BEAT ME TO THE PUNCH!!!! Can you here me Barry Franks and every other law maker….EQUAL DISCLOSER FOR ALL!!!!!!!! ALL YSP, FEE’S….WHATEVER! NO HIDING BEHIND THE FACT OF BEING A FEDERALLY CHATERED BANK!!!! IF that was the case Wells, Countrywide, would and is out off the market!!!

ALSO, NO CONGRESSMAN OR LAW MAKER IS ALLOWED TO EXCEPT A DONATION FROM ANY BANK, LENDER, FOR THERE ELECTION CAMPAIGN!!!

Paul,

I believe in everything you have said. If someone lost their house because you gave them a 6.25% as opposed to a 5.75% then there is something wrong with the buyer, not the product. I have a question for you and everyone else on this post.

When the YSP is eliminated, then what? And when L.O. is licensed, which is a good thing, who is it on when the house goes into foreclosure?

IF YSP is elimated why have any business. Can we just buy our perscriptions from our doctor, good bye pharamcist. How about buying a car direct from Honda, who needs a dealer! How about getting a loan from Fannie Mae and skip right over Wells??????

The fact is I can deliver a better loan to a consumer at a cheaper price than Wells and other banks. They know it , we know it!!! Shit flows downhill and we are the easy target right now!

And one more thing!!!! I know I am out of controll!!!!

What does YSP have to do with mortgage fraud????? We are in this mess because underwritting standards were to easy,stupid loans 100 ltv stated-580 credit NIV?? bond ratings were inflated, and so on.

WE ARE NOT IN THIS MESS BECAUSE SOME BROKER MADE 3 YSP INSTEAD OF 1.5YSP. The fact is it was a bad loan to start with and the blame lies on the bank who created the product, and the bank who bought them!!!

Food for thought…..If banks limited the YSP TO 1.5 4 YEARS AGO AND HAD ALL OF THE SAME LAON PROGRAMS, WOULD WE BE IN THIS MESS??? YOU BET YOUR ASS BECAUSE THE PROGRAMS , UNDERWRITTEN AND PURCHASE OF THESE LOANS BUY WALL STREET IS THE REAL PROBLEM!!

I would like the AG of Mass. explain to me how a 6.25% o point loan with a YSP 0F 1.5% Is a bad deal compared to Wells at 6.5% retail????????????????????

Now I have to charge points to my client for the rate of 6.25% or he can go to Wells and pay 6.5% no points??? Oh buy the way Wells is getting 4 points on the inside for that loan!!!!!!!!!!!!! AND IT IS NOT DISCLOSED!!!!!

I hope the lawmakers take ther time and think this out, sometimes no action is this best action until you have had ample time to digest the facts!!!!!!

CTAN

You are correct!!! The fee’s have just been moved!!!!!

The answer is so simple!!!!!! ALL LENDERS DISCLOSE EVERY LAST DIME!!
NO HIDING DELIVERY FEE’S!!!!!!

Then brokers and bank would have to survive on honesty and customer service, what a novel idea!!!!!

The best Republican mortgage broker line of the year.

Mike Durocher – “I am Republican, a proud member of the vast right wing conspiracy and I believe in corporations I believe they should make money and as much as they can. I am starting to doubt my beliefs. ”

I just about choked on my turkey sandwhich when I saw that.

Then Mike says, “I will certainly will never be no Democrat \’e2\’80\rdblquote but the Republicans are not the answer to this countries problems either.”

Ron Paul is the answer Mike!

paul — you are missing some basic business concepts … when a customer retains your services to provide them with “money” they are not buying a manufactured product such as a drug or a car … they are retaining your services for your knowledge, advice and expertise as a professional … what the Massachusets attorney general has determined is that as a professional you are not entitled to receive illegal kickbacks from lenders in the form of YSP for the funding of the loan … however … you are entitled as a professional to charge fees for your services to the client who retained you (the borrower) such as an attorney, an accountant, a doctor, or a financial planner would.

Loan Officer Licensing States

The following states require additional licensing for Loan Officers. The definition of a loan officer is different in every state, but the usually meaning is anyone that is compensated for taking an application and reviewing the rate and fees with the borrower. Unless otherwise noted, these states require loan officer licensing for all license types.

Loan Officer licensing varies from state to state. It can be as easy as just notifying the state, or it can be as difficult as a full application, fingerprint background check, bonding, initial and continuing education, and an exam. Contact Us today if you need assistance with licensing your Loan Officers.

Alaska – July 1, 2008
Arkansas
California – DRE Only (Education required under CFL and RML Licenses)
Colorado
Connecticut
Florida
Hawaii
Idaho
Illinois
Indiana – Loan Broker Licensees Only
Iowa
Kansas
Kentucky
Louisiana
Maine
Maryland
Mississippi
Montana – Mortgage Broker Licensees Only
Nevada – Mortgage Broker Licensees Only
New Hampshire
New Jersey
New York – January 1, 2008
North Carolina
Ohio
Oklahoma – Mortgage Broker Licensees Only
Oregon
South Carolina – Mortgage Broker Licensees Only
Tennessee
Texas – Mortgage Broker Licensees Only
Utah
Washington – Mortgage Broker Licensees Only
West Virginia
Wisconsin

great thanks Virginia!

CTAN

Financial planners do get 12b-1 on assets under management. .250-1.00 basis points. This fee is to pay the planner for his time. In that I mean does your planner look out for you? Does he have a semi-yearly meeting with you to discuss your concerns or needs. That is what the fee is for. If you mdo not hear from him/her it is time to find a new planner.

Virginia,

I am not trying to give you a hard time here. I am a license Mortgage Banker in NJ. There is only a test for banker, broker, correspondent lender, secondary lender. No test for LO JUST SIGN ND DRIVE!

Virginia,
This was and still is a big problem in NJ, bankers/brokers were licensing everyone that had a pulse. They would bring in every piece of crap loan and then try to find a home for it. They make as much money as possible and now we are in this mess. Not all brokers did this, there many honest broker here but a few bad apples spoils the crop!

Chris

Every LO is licensed in NJ but there are no requirements, testing, fingerprinting, bond. If every new LO had to complete 40-60 hours classroom time, pass a test and buy there own bond it would help! The average Joe would not put in his time.

Good nite all!! Off to watch the Pats complete the perfect season!

What about computer chips embeded in the loan officers skin and anytime they charge more than a point, it is then registered into a central database that is manned at Central Mortgage Control. CMC?

Much like a sex offender, but a loan offender and they will have to register has a loan offender is they ever move and if they don’t register, it’s like a lo jack system and the DRE or whomever can send in their goons and I dunno, shock him with taser guns or something like that to teach em a lesson.

How about we videotape every transaction!! We can see the borrower tell us he makes 100k or has money in the back, or a job. It will show if the LO is telling the truth…quoted no points or this is the best loan for you!

When there is a problem, lets go to videotape…case closed!

How many people understand this!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

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MLMortgageguy, CTAN, you guys are class acts. Dialogue and communication is key whenever you’re dealing with a problem.

I think what CTAN has proposed is priceless. I’d like to see those provisions put in place. When I spoke to the Senior Bank Officer at the New York State Banking Department in regards to my complaint against the brokers who worked on my loan, we spent about an hour on the phone and basically he kept telling me if I had a problem with the rules or the enforcement powers of their agency I should speak to my legislatures.

He was aware of what was going on, but very non-chalant about his inability to really do anything about it. He said, WE don’t act as litigators.

Paul said: Tape the closing. I LOVE THIS IDEA.

In that closing, their should be FULL DISCLOSURE, and that would seperate the lying homeowners from the lying Mortgage Brokers.

I really liked all of your suggestions, CTAN but especially suggestions NOs 2, 4, and 6 and 7

“1. Loan Originators need to be licensed. They always should have had to be licensed as its only after an LO really has something to lose will the BS stop.

2. National registry, while I don\’e2\’80\’99t like the idea of a bigger government it is important to track what is going on with the players in this industry.

3. Continuing education I think is important. The one complaints of those who I would consider to be professional Loan Officers and Realtors is the lack of knowledge of a certain element in the lending community.

4. I think first time buyers and those doing a cash-out refinance should have to attend an online class and proof of this should be required in the original submission to the Lender. A big problem with what is going on with homeowners not understanding what they are getting into could be avoided with this simple measure.

5. Loan officers should be financially responsible for fees at the closing table that where not disclosed to the borrower at least three days prior to signing.

6. Homeowners that engaged in deception during the loan process should be held accountable in the event that the loan forecloses. Presently (at least in Arizona) Lenders are prohibited from entering a deficiency judgment against a foreclosed borrower.

7. Yield spread should not be paid Negative Amortization loans (or reverse mortgages for that matter)”

THe biggest problem I have with the Mortgage Brokers I worked with is I ASKED THEM, I said, what are you making off of this deal. I am in favor of everyone making as much money as they can, but they lied to me, over and over. The LO said the Loan Origination Fee was ALL they were making.

I have to say, I still don’t get the YSP thing. What is this with I sell you a loan at a certain rate, and then bump the rate up AND charge you a fee?

I can’t wrap my mind around the sense of it. What is the basis of this fee?

JacMac

Thats right tape the transaction!!!! I am also a financial planner and when I make a trade or buy a mutual fund my conversation is recorded!!!!!!!!! It protects everyone. If you are a honest broker you will not care if you are taped..It would cost the the price of 3 tapes 1 FOR me,1 for the client and 1 for the bAnking dept and a $50 fee for the person taping it!!!Oh I forgot…if we taped everything there would be no one left to blame….we would not need a bond or insurance because tapes don not lie!!! We can now get rid of 2 more businesses bonding and E & O!

Chris

The rate is not Always increased to pay a YSP!! I can get better deals from certain lenders that will pay me a ysp and have a better rate than retail. I can close a 30yr fx full doc, 10% conforming at 5.875% and get paid 1.25 ysp. Wells, B of A are all higher in rate!

All records are meant to fall…..now can the Pats seal the deal 19-0????
It will not be easy!!!!!

Giants took there foot off of the pedal in the 3 quarter, try to protect being up 2 scores. You have to go for kill, no fear!

Ron Paul is a joke. — When the liberals and Democrats support Ron Paul then I know something is very wrong.

The lending industry – not just the mortgage lending — Banks also have raped this nation and bleed it through interest rates and outrageous fee’s.

This is a dumb question — no it’s not — can someone tell em why if someoen buys a house for $200,000 — the bank earns some $279,000 in PROFIT??

And your total amount of payments is 479,000 that you paid for this house. Like I said above. I am a proud member of the vast right wing conspiracy and I support corporatiosn right to make profit but something is terribly wrong. Premium Yiled Spread. 1.5 % and the bank makes $279,000??????

Mike,

The main reason net income isn’t used is because a person may have multiple deductions, i.e 401k, various direct deposits, not just your traditional tax deduction. A person can net 5000 after tax and have money disperse everywhere before they get a dime. Their net end the end is $1000. That doesn’t work

It’s not $70 — it’s $279 thousand. I understand all your reasoning — I understand the economics. And if you knew what you were talking about your have figured out that it’s NOT $79 k ….. I’m just trying to make a point that making more money on the interest for the investor then you paid for your house is is is is well …….in my opinion wrong.

“JacMac,

What is your professional trade? Is it real estate related?”
It makes no difference whether I am head Manager in McDonalds or a doctor in San Juan, I already stated that I do not work in the mortgage field over and over and I said I didn’t get what the YSP was for, so it should be clear I’m not in your field.

“When the L.O. is paid a YSP the rate is increased. This can be used if the borrower is short on money and yes it can also be used to pay the L.O. Keep in mind, the lender is never going to take a short. You don\’e2\’80\’99t have enough money and the YSP can offset that, you will still pay for coming up short. Your rate will increase.”

What the hell does this mean? I looked it up, and I read that the YSP was intended to offset closing costs that the borrower doesn’t have — it’s paid to the LO to offer a higher rate to the borrower, right, so that the bank makes more over the life of the loan.

See, that makes sense to me, but what you’ve written up there does not compute. Know why?

Because I’m not in your industry. Mortgage Brokers I think need to recognize their audience and when they talk to someone who is not in their field, they need to use language an every day person can understand. `You don’t have money for closing, so the bank is going to charge you a higher rate and you’ll end up paying more over the life of the loan. THey’ll give me compensation for offering you that higher rate.’ something like that everyone can understand. But that SHOULD BE DISCLOSED. It shouldn’t be kept a secret from the borrower. The borrower IS PAYING THAT YSP TO THE BROKER THROUGH THE MONEY HE/SHE ENDS UP PAYING OVER THE LIFE OF THE LOAN FOR THE INCREASED RATE.

“The lender is getting a very large compensation for the borrower paying on that rate every month for the period of time they keep the loan in their portfolio. This can amount to tens of thousand of dollars.”

Exactly, Chris, so why is the Mortgage Broker entitled to more compensation for offering a higher rate? Does he do more work? What the hell is the compensation for?

” If you consider what the lender is making, paying the L.O. 1% or 2% is nothing to bitch about. JacMac you have to come to realty on this point.”

Are you kidding me. You’re saying, Look, you’re gonna pay tens of thousands of dollars to the bank anyways, what’s a couple of thousand to the LO for NOTHING!!!!!
Why does the the Mortgage Broker deserve the YSP?

I undestand this is a controversial subject. The MB says, well the banks will make it anyway. Why does the bank charge you more money over the life of the loan, because you don’t have the money up front to pay for closing?

I guess the short answer is because they can. Maybe someone said, Hey, bank, you’re making this money, we want it, too. And the YSP then was given to the Mortgage Broker. I believe, as a layperson, it is an unfair, unecessary cost, a kickback! The MB should be paid the fees they ask for and that’s it.

“Nothing and I mean nothing you purchase, will you get 100% disclosure on the money being made. To some degree its none of your business, considering how any business is conducted that involves money.”

This, again, Chris smacks of the old, It’s Always Been This Way in All Industries, Not Just Us argument and it just doesn’t hold water with me. Wrong is wrong. Just because it is commonly done doesn’t mean that it should be. If I pay for something, I as the purchaser should know exactly what I’m paying for and how much I’m paying. My beef is not about YSP so much as it is about disclosure. There should be 100% disclosure of what I AM PAYING.

” Consider this also JacMac when you go obtain a loan, first you must do your homework as consumer. . . A consumer must always beware. Period. I\’e2\’80\’99ve told you this before. . . And after you have done your homework and you know what is going to happen and you have settled on what you will and won\’e2\’80\’99t accept then you have no other choice but to go with it . . . The meltdown is not about the YSP. So stop it. . . as an adult some responsible was yours to bare. You were or are in a Opt Arm and you lost control of it. You tried to get out of it and went back to the same L.O . . .”

Chris, you’ve got to be kidding, right?

When I want a lecture from my father, I’ll call him. You’re talking your fiction again. You don’t really know what happened with me because you don’t care to know. You think you know because you’ve lumped all of us “dumb option ARM” homeowners in the same category: IRRESPONSIBLE, UNINFORMED, LAZY ABOUT BEING EDUCATED. Do me favor, either get to know my situation and my history and then comment of don’t.

The recommondations I listed came from CTAN, not me. If you have an issue with them, you need to take it up with him.

I liked his suggestions because they seemed to make sense to me, but again, I don’t work in the industry.

I had hopes for this conversation, because we started talking about solutions, but now we’re back to passing the buck and laying blame.

I guess I’d have to castrate myself on this keyboard, walk on hot coals, pour tars and feather myself, whip and mutilate myself to death before any of the accusing Mortgage Brokers will be satisfied that I understand that I bare some responsibility for the position I’m in — but I’m done having that conversation.

It is getting pretty boring.

I don’t care who makes how much money, I care about being lied to when I ask questions.

When I do my job, if what I’m responsbile for doesn’t get done or is done wrong I only have myself to blame, and I do get blamed and it’s my paycheck on the line, period.

This is simple to understand.

Jackmac YSP is disclosed on the HUD-1 closing statement, that is a fact!!
Bankers and brokers must disclose this on a HUD. Banks such as Wells DO NOT DISCLOSE YSP!!!! They are not required to!!!!!!

If I close a 200K LOAN at 6.25% and receive 1.5 YSP, I receive $3000.00
but if you went to Wells retail your rate would be .250 higher and Wells would not disclose on the HUD how much they were paid . If your rate was now 6.5% your payment is higher and Wells made a hell of allot more money!!! Even if you were able to get the same rate from Wells, they are still getting a YSP FROM LETS SAY FANNIE MAE. The difference is they do not have disclose on the HUD. THEY ARE A FERDERAL CHATERED BANK AND DO NOT DISCLOSE!!!!!THAT IS WHY THEY WHAT BROKERS OUT SO THEY DO NOT HAVE TO DISCLOSE!!!!!

IT IS SIMPLE…EVERY BANK, LENDER,BROKER, WHO EVER… DISCLOSE, DISCLOSE, DISCLOSE…END OF STORY!! HOW CAN YOU AS A CONSUMER COMPARE MORTGAGES IF YOU DO NOT KNOW WHAT WELLS IN GETTING IN YSP……..YOU CAN’T AND THEY WHAT TO KEEP IT THIS WAY!!!!!! I HOPE YOU DO NOT THINK WELLS IS DOING THE LOAN FOR FREE???????

Wells has congress ear with there donations, but I do not!! THOSE ARE THE FACTS…PLAN AND SIMPLE!

We put nothing down. Interest only. Basically, everything that you shouldn’t do, we did. My husband’s credit wasn’t as good as mine and we had to have a stated income loan which was the reason we were given for the type of loan we got. Then we stupidly refinanced to get out of our original bad loan and that’s when we REALLY got taken for a ride! Bait & switch, unnecessarily high interest rate (as a contact at Countrywide later told me), we were lied to about the terms of our new loan. We were stupid to trust.

Also, the price of the house has decreased since we bought it. It was at $610K. Now it’s worth $572K. However, when we refinanced they appraised it for $780K so we could get into our new horrible loan. Basically, everyone has made money off of us.

I’m not saying we’ll never buy again but we will do so only when we have enough saved up to put 20% down and we will consider a 30-year fixed rate mortgage only. Plus, we will now need time to allow our credit to recover from this debacle. Add to that the fact that my husband has lost a lot of his income but the bills keep pouring in, and we have no savings left at all.

I even looked into suing the bank to no avail. I could probably pursue but at this point, I don’t even have enough money to pay the regular bills let alone an attorney.

We are learning the hard way. We definitely didn’t do this to “play” the system. We weren’t looking to make a quick buck. We honestly thought that if we didn’t buy when we did that we would NEVER be able to afford to buy a house. We trusted everyone and it’s only after the fact that I’ve come to the conclusion that an attorney is mandatory to have in these transactions.

It’s too late to save the house. I just need this nightmare to end so we can rebuild our life. Yes, we were financially unsophisticated at the time we bought but now I have learned so much. I research everything, am well informed about the mechanics of a short sale, the tax implications of foreclosure and short sales; I even watch Suze Orman so I can learn how to invest wisely (if we ever have money again). I never intend for this to happen to me again, and knowledge is the only weapon I have in this unsavory business.

YSP FROM 6 YEARS AGO AND WE ARE STILL HAVE PROBLEMS!!!

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You are here : Legislation >> Big Win on YSP

Big Win on YSP

On October 15, 2001, HUD issued a new Statement of Policy 2001-1, clarifying the legality of yield spread premiums (YSPs) paid by wholesale mortgage lenders to mortgage brokers. It is a strong statement that the legality of mortgage broker compensation must be determined on a case by case basis; that the fact that a yield spread premium is based on the interest rate of the loan is not relevant in determining whether the payment is legal; and that the 11th Circuit Court of Appeals in its recent ruling for class certification in Culpepper v. Irwin Mortgage misinterpreted the earlier Statement of Policy 1999-1.

This clarification is precisely what mortgage lenders and brokers had sought since the 11th Circuit ruling in June. That ruling caused significant alarm in the industry because the court essentially discarded the two-part test of legality of YSPs established by SOP 1999-1, and also commented that a court could find YSPs illegal solely because they are calculated based on the interest rate of the loan.

HUD found that the court’s ruling was flawed and recognized that the Department has a responsibility to clarify the law when there are conflicting court opinions. It states:

It is HUD’s position that where compensable services are performed, the 1999 Statement of Policy requires application of both parts of the HUD test before a determination can be made regarding the legality of a lender payment to a mortgage broker. Under the first part of HUD’s test, the total compensation to a mortgage broker, of which a yield spread premium may be a component or the entire amount, must be for goods or facilities provided or services performed. HUD’s position is that in order to discern whether a yield spread premium was for goods, facilities or services under the first part of the HUD test, it is necessary to look at each transaction individually, including examining all of the goods or facilities provided or services performed by the broker in the transaction, whether the goods, facilities or services are paid for by the borrower, the lender, or partly by both.

The Statement further defines that YSPs cannot be judged to be illegal solely because they are calculated based on the interest rate of the loan:

It is HUD’s position that neither Section 8(a) of RESPA nor the 1999 Statement of Policy supports the conclusion that a yield spread premium can be presumed to be a referral fee based solely upon the fact that the lender pays the broker a yield spread premium that is based upon a rate sheet, or because the lender does not have specific knowledge of what services the broker has performed. HUD considers the latter situation to be rare. The common industry practice is that lenders follow underwriting standards that demand a review of originations and that therefore lenders typically know that brokers have performed the services required to meet those standards. Yield spread premiums are by definition derived from the interest rate. HUD believes that a rate sheet is merely a mechanism for displaying the yield spread premium, and does note indicate whether a particular yield spread premium is a payment for goods and facilities actually furnished or services actually performed under the HUD test. Whether or not a yield spread premium is legal or illegal cannot be determined by the use of a rate sheet, buy by how HUD’s test applies to the transaction involved.
This Statement of Policy definitively states HUD’s opinion of what RESPA requires for a finding that a yield spread premium is illegal. It clearly says that HUD believes, and has always believed, that all such determinations of legality must be conducted on a case by case basis, thereby dramatically hampering for class action lawsuits challenging the legality of YSPs.

In addition to clarifying the legality of YSPs, HUD also calls for new disclosures early in the loan process, to give borrowers more information about the originator of the loan and the fees charged by originators. HUD believes that simply disclosing a YSP or other broker compensation on the Good Faith Estimate and the HUD-1 is not sufficient for borrowers to understand what they are paying for or to negotiate the fees with the lender or mortgage broker. HUD asks for lenders to begin providing a new disclosure, and says it will require such disclosure through a new rulemaking.

Also, in a press release issued late yesterday, HUD says it will be issuing a Mortgagee Letter requiring this new disclosure in all broker-originated FHA loans. We will report on this to you as soon as it is available. HUD also announced a $1.25 million contract to an unspecified contractor for increased RESPA enforcement.

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Juli, I am so sorry that you are in this situation, a situation that so many of us faced.

The lenders and underwriters it seemed, when they got greedy enough, didn’t care who they loaned money to or how. They were toxic loans and they gave it to us all.

CTAN: “A lot of the massaging that a broker does is not fraud it is simply that the broker has access to many, many lenders who all have a little different take on one guideline or another or different pricing for different products. For example lender A might be a little restrictive on a FNMA level 2 when Lender B may actually specialize in that product.”

So here’s the problem I think. This is great, that a broker can do this for a customer and offer the use of their expertise to get a customer the best loan, but when a broker is a liar and looking to make the most off of a deal at the expense of the customer, that can be a disaster. And I think this is part of the problem we are facing now. The broker is in a unique position to either help the customer tremendously or screw them royally.

JacMac- Agreed this is why educated borrowers and full disclosure are very important. The other thing I forgot to mention is that if “Brokers” become extinct, Borrowers will no longer be benifited by full disclosure as banks and Bankers are not required to disclose the YSP

I just moved my investments over to Edward Jones. The gentleman told me when he was finished letting me know what his professional opinion was regarding where to place my portfolio’s. Then he says there is a 3% fee to do so! I said ok let’s do it! This is America and we have free trade here right? I could of went down the street and chose to shop him. Just like consumers shop me here in my area. I’ll tell you that what I don’t want is one choice! Because when you have one choice the consumer loses everytime! Look at the profits oil companies are raking in! Where are the Feds on this issue? How about what banks are making on credit card interest,where are the Feds on this? So do we just stop brokering everything? Oil, insurances, food, travel, electronics, home goods,Department stores, trucking…. ect.? This is ridiculous in it’s self! When a consumer comes to me he is probably going to run into me sometime in the future and I always keep that in mind. Whether it be Cosco or pizza I see my clients all the time out and about and I have no problem saying hi right into there eyes! If you want Russia where there are no choices…well maybe apply for a Russian citizenship? As a consumer I know every time I go out into this world I need to research my decisions right? Well so do mortgage consumers! What the Goverment has done is tightened up across the board which is a huge mistake let me explain. What about a poor guy who has 25% ltv doesn’t show income and maybe went through a heart attack. The insurance company put things on his credit report that will take some time to get removed but hey we cannot get him a loan to save his ass! How about common sense lending and we remove this credit score approch to lending? How about the three C’s? I have had banks turn down clients who missed the grade by one point on there middle credit score! You have got to be kidding me! Do you know that if you close a credit card down now your score could drop and that the other credit cards you have can have the banks double your interest? Why then wouldn’t it be ok that if you miss a 30 day on your mortgage your rate there would double also? Do you get my point…banks rip the consumer off with credit card rates and daily bullshit bank fees do they not? I as a consumer get the choice where I want to bank right? Well I chose a local credit union and there the lessor of the other evils out there in bank land! Competition is how you keep prices down and if the Federal goverment is stupid enough to let banks take over and be the new Sheriff in town and we the people set back and let them do it well we deserve everything we get! I say when no one is happy then we all win!

How about disclosure for the borrower…..

I have a job
I really make this income
I will live in this property
MY BROKER SAID I SHOULD WALK AWAY BUT I AM GOING TO BUY THIS ANYWAY!!
I WANT AN OPTION ARM…I UNDERSTAND THE LOAN!!!!!

Like I said before…videotape the application and closing…no were to hide for anyone!!!!

JacMac- LOL “Shady”. the reason brokers get wholesale rates is simple to understand difficult to explain but let me use an example.

\’e2\’80\’9cLender A\’e2\’80\’9d opens shop and is going to offer loans to the public (retail) they close 50 million a year and get say a 4% revenue factor on average so their gross profit is 2 million. Lets say they have a million dollars in expenses so they net a million a year

\’e2\’80\’9cLender B\’e2\’80\’9d opens a wholesale shop has 2 million in expenses, only averages 2% on their volume but closes a billion dollars in volume through the already established national network of mortgage brokers. So \’e2\’80\’9cLender B\’e2\’80\’9d nets say 18 million a year.

Now in order for \’e2\’80\’9clender A\’e2\’80\’9d to match \’e2\’80\’9cLender B\’e2\’80\’9d in volume \’e2\’80\’9cLender A\’e2\’80\’9d would have to open 20 retail locations all over the country at the cost of millions of dollars every year and vast amounts of risk.

The short answer to your question is that the broker has operational costs to consider and in order for a Mortgage Broker to be able to compete with \’e2\’80\’9cLender A\’e2\’80\’9d \’e2\’80\’9cLender B\’e2\’80\’9d Needs to give the Broker YSP. \’e2\’80\’9clender B\’e2\’80\’9d makes less on every file but makes up for it in volume.

When I said that the YSP was paid on the Margin for Neg. Am. ARMs I didn\’e2\’80\’99t mean to infer that it was disclosed in the margin but rather was calculated on the Margin of the rate rather than the index

Margin 3%
Index 3.375%
Rate 6.375%

The bank controls the margin. the index is what the banks pays for the money the Margin is the profit. (Very basically) the only loan product that the LO can be paid by increasing the Margin with out increasing the Start rate is a Negative Amortization loan like the POA ( Pay Option Arm)

Loan Officers think in terms of percentages, a \’e2\’80\’9cpoint\’e2\’80\’9d is short for a percentage point. I prefer to speak in terms of dollars when going over the GFE or HUD but that\’e2\’80\’99s just me. \’e2\’80\’9cPoints\’e2\’80\’9d just seems like a dirty word.

The Broker can\’e2\’80\’99t always charge what they need to up front because the Borrower usually doesn\’e2\’80\’99t have it. Also sometimes it makes more sense for a borrower to pay a little every month rather than a chunk up front (not everyone plans on keeping the loan). Besides if I offer you 5.75% with 4k in points and the bank offers 6.25% with 1k in points which would you choose?( which you would choose is beside the point why shouldn\’e2\’80\’99t I be able to offer the same deal as the bank?)

The front side comes out of you pocket either literally of out of your equity in the case of a refi. The back side comes from the bank. I think the term comes from the offer coming from the bank \’e2\’80\’9c I can give you 6.5% with 2 point BACK to you Mr. Broker\’e2\’80\’9d

Brokers do disclose in simple dollars and cents it is listed on the GFE and HUD it\’e2\’80\’99s the Banks that have the ability to be secretive. In the example of your loan where title showed you something that was not for you to see\’e2\’80\’a6.. you where dealing with a bank a broker would have disclosed it to you by law. Back to my original statement #83 its not brokers that consumers need to be weary of\’e2\’80\’a6.it\’e2\’80\’99s the Bank.

Very “shady” indeed.

I mean “undisclosed YSP” by the broker, that’s a problem for me.

JacMac- To answer your question about not understanding the disclosure I would have to say that if you dont understand then its not disclosure. Here in the Southwest if I disclose in “English” to a Spanish speaking borrower then I have not disclosed.

In response to a Broker not discloseing YSP? Its impossible, it may have happened once or twice by mistake but and a hard and fast rule Brokers MUST disclose its federal law and Lenders wont fund on a loan where YSP is not disclosed. Thats how I know that you delt with a banker.

Chris- I would say that unless the Borrower hires someone to represent their interest in the transaction then they are responsable from the point of application. The borrower is not a client they are a customer and unless ther is a fiduciary relationship they are never the “client”

As to the second part of your question, I dont think a Loan Officer should be held liable for a borrower not understanding unless that Loan Officer represented himself as an agent to the customer, creating a fiduciary relationship. other than that if you are concerned it needs to be in writing and signed. everything you discuss with the borrower needs to be put into writing and signed.

It may sound crapy but the truth is that this whole business about people thinking that the Loan Officer had there best interest in mind is completly unfounded. The LO is a salesperson and no more has the best interest of the borrower in mind than any other salesperson.

Now dont misunderstand that statement. I dont mean to say that they shouldnt have the borrowers best interest in mind, and of course you get more referal biz when your customers are happy but the truth is that there is no agency relationship and therefore nothing that says that LOs are SUPPOSED to look out for the Borrowers interest….So Buyer beware

Chris, I don’t generally have discussions with people who are not listening to me — you’ve shown me more than once that you are not listening. So no matter, you have your ideas about me and they’re dead wrong — but you can continue to think as you like, it seems to give you some sort of satisfaction of being “right”.

Personally, I really dislike “right” fighters — discussions like that don’t get anywhere, no understanding, healing, growth — that’s my opinion.

CTAN, I dealt with a mortgage broker. By asking you that question, I meant to point to the fact that a YSP that is not explained to a customer, even if it appears on the HUD 1 is undisclosed when the buyer doesn’t know what it is. That’s my opinion.

I didn’t know what the YSP number in the inside margin meant. I had no idea.

Mortgage Brokers, as far as I am concerned do not hold themselves out to be disinterest sales people. In my experience they hold themselves out to be someone looking to close the best deal for their “client” — they call the customer that; it’s part of their sales pitch.

I say, let’s just agree to disagree.

Chris,

Impossible to not have a ysp disclosed? How about when it shows up on the HUDd as “lender paid premium”, “lender premium”, “marketing incentive” or any of 50 other names I’ve seen it called other than ysp? If ysp is such a wonderful tool for the borrower, why do brokers go to such great length to hide it? Simple, because it’s not being used to reduce COSTS to the borrower, its used as a source of income.

Go look through the HUD policy statement from 1999 and 2001 and see if any ysp charged could pass their test as a legitimate fee. It has unearned fee written all over it. Only issue is the right lawyer hasn’t picked up on it yet. When I see (yes I’m a regulator) brokers charging 2 on the front and 2 on the back in addition to the other $2k in garbage fees there is nothing more fun than having them explain exactly what service was provided for each and every fee. Most can’t make it past the “application fee” or “admin fee” before they run out of ways to explain the services they provide. It’s truly pathetic.

P.S.

To all. It’s still and always will be, “educating” yourself more about this industry, the complex workings of the nation we live in and making sure who we deal with, really knows what they are doing. I hope that the “really” concerned people get what they are seeking out of this.

HAPPY NEW YEAR

Chris, CTAN, Paul, JacMac, I would for you all to be regular contributers to this blog. Please email me if you’d like to get a non-paying low level job that might very well lead into a paying job someday and it will be great exposure.

This blog is unique and I appreciate you all that make it unique and real.
I feel all your comments are very valuable and needed in the mortgage blog-sphere.

“Keep it moving and be sexy in the 08\’e2\’80\’b2- my coffee is now all over my laptop screen and keyboard. – Chris, you owe me a new laptop, lol.

I hope everybody had a good and safe new year!!! I am holding my breath just to see what comes of 08 for the brokers (the few that are left, anyway). If wholesale lending does not “implode” then we all must re-evaluate our business plans, sales goals, and such, to be able to do better business in the craziest of guideline tightening and credit crunching times i’ve ever seen! to quote one of my favorite sales books, we must