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CFPB fines Franklin Loan Corp. for giving employees illegal bonuses

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Mortgage Professional America | 13 Nov 2014, 01:28 PM Agree 0
The Consumer Financial Protection Bureau has fined the California mortgage lender for giving its employees incentives for steering consumers into mortgages with higher interest rates.
  • Pat | | 13 Nov 2014, 01:46 PM Agree 1
    They should fine McDonald's for pushing people to SuperSize their order
  • | | 13 Nov 2014, 02:05 PM Agree 0
    They fine congress for being over paid & under qualified.
  • eubanks | | 13 Nov 2014, 02:22 PM Agree 0
    1400 consumers 731k borrowers are only receiving 521 bucks each.
    not close to what they lost.
  • Jeff | | 13 Nov 2014, 02:32 PM Agree 0
    I hate competing with scum like these guys. If this is all they fined them after they completely disregarded LO comp others will follow suit as they think it is worth the risk.
  • ERIC | | 13 Nov 2014, 02:34 PM Agree 0
    They should fine FNMA and FHLMC for the mortgage crisis,

    Fine Clinton for starting the whole mess by pressing for mortgages to borrowers who could not afford them.
  • Kilgaren | | 13 Nov 2014, 02:59 PM Agree 0
    Fine Wall Street Securities Firms for creating the Sub-prime Structure for the Residential Mortgage Backed Securities! What about the additional compensation that "Bankers" in the Wall Street firms earned on execution?

    Kilgaren exclaimed, “Do you really think it was Angelo Mozilo – Countrywide; New Century Mortgage – Brad Morice and Frederic J. Forster, and Mortgage IT and others that actually created the sub-prime debacle?

    NO. It was the Wall Street Sewer Rats.” Without the Wall Street Sewer Rats, Mozilo and crowd would have no one to sell the mortgages to. Duh.

    Wall Street Sewer Rats know that with a certain level of “credit support” they may underwrite mortgages such as the no-doc mortgage, the “liar mortgage” and any other type of mortgage regardless of each borrower’s qualification(s)
  • Brad Strecker | | 13 Nov 2014, 03:38 PM Agree 0
    Fine the airlines that charge every passenger a different fare for the same flight. Fine thousands of dealerships that sell the exact same car to many different consumers for different prices. Mortgages and money are just another commodity. The better you educate yourself the better you will do. You cannot fix stupid!

    The government needs to get the F out of the mortgage business and let consumers and lenders bargain for the best deal.
  • Tester | | 13 Nov 2014, 06:07 PM Agree 0
    ......... meanwhile across the pond , Lord Dimon pays an 8 Billion dollar fine and rides off in the sunset
  • loan slug | | 13 Nov 2014, 07:26 PM Agree 0
    1 billion was the cost for CFPB... yahoo great tax payer deal.
  • | | 13 Nov 2014, 08:48 PM Agree 0
    Agree pat let's fine other industries for the ability to make more money! I don't know why any bank.would even want to make mortgages anymore. The government is just looking for law suits!
  • Mike Shaw | | 14 Nov 2014, 09:16 AM Agree 0
    Once again, like Castle and Cooke, no mention of the LO's themselves being fined for taking the bonuses. The CFPB needs to make an example out of these LO's or this will not change because even after the licensing requirement, our industry is still full of corrupt mortgage officers and mortgage companies. By the way, those of you still complaining about the comp rules need to realize that this is the new normal. The only people that I know that actually took a pay cut because of the new comp rules were those that were gouging their customers. Everyone else got a raise.
  • Not Yo' Nanny | | 14 Nov 2014, 02:54 PM Agree 0
    Mike Shaw, Do you now how banks price mortgages, or how cars are priced, or sushi, or apples? You see they are not all the same, they can be as different as the specific products that fall into the generic terms above, and all net the seller higher margins depending on the product. One of the many problems with LO Comp. has nothing to do with gouging, and everything to do with customer service and competing for consumers business according to mortgage size and other factors. Price a $417,000 mortgage at Bank of America, then price a $60,000 mortgage there and tell me why there is a difference. Brokers CANNOT do this, meaning they cannot compete for the consumers business. That prevents the consumer from getting the best price. The playing field has been rigged in favor of the banks, where it's likely you work judging by your comment, and exactly how did anyone 'get a raise' due to LO Comp.?!? You can make a law one day and overnight, everyone is breaking the law, what a concept!
  • Not Yo' Nanny | | 14 Nov 2014, 02:59 PM Agree 0
    Eubanks, Any evidence to back that up? Do you know how mortgages are priced? It might be too much.
  • Mike Shaw | | 15 Nov 2014, 08:27 AM Agree 0
    First of all, I don't work for a bank, and in my 17 years of being an LO, I have never worked for one. I worked for a broker for about 6 months in the late 90's and told myself that I would never work for a broker again. Until now, I have always worked for correspondent lenders with the ability to broker, if needed, because I don't like losing control of the process to a wholesale lender. My current company is a Fannie/Freddie seller servicer and Ginnie issuer, and for me, it is the perfect set up. Now that you have my background, I'll respond to your other comments.

    I understand how the free market works. Consumers have the ability to shop/price any product prior to making a purchase. I myself do this every day. I never said that I agree with the comp rules, I was just saying that they're not going to change. However, most LO's that I know had an increase in compensation when the rules went into effect. I remember having to cut my commission down to 50-100 BP's just to keep a customer and now I make 150 BP's on every mortgage and hardly ever lose a customer. The LO's that were charging 300 BP's and an origination fee on every mortgage, which I consider gouging, are the ones that took a pay cut.

    I will admit that since I'm not a broker, I don't feel the full effect of the comp rules. What I don't understand is if the comp rules are burdening so many, why not make a change? Does it really matter whether or not you pay the rent or if the company pays the rent? You and your book of business determines whether or not you succeed, not the name on the door.

    Lastly, the LO's that took part in the additional bonuses should be punished and fined. In my opinion, this is the only way we'll stop companies and LO's from breaking the rules. Everyone has a right to their opinion and I was just stating mine.
  • Fair LO | | 17 Nov 2014, 11:14 AM Agree 0
    I agree with Mike Shaw 100%!!!
  • Not Yo' Nanny | | 17 Nov 2014, 02:56 PM Agree 0
    Mike Shaw and Fair LO,
    Your opinions are not consistent. You say you don't agree with the comp rules yet say you want LO's punished to make an example out of them for 'breaking the law' that you don't support. !?

    You said you make more now because you don’t have to cut your commission to compete for a mortgage. When you cut your commission the consumer got a better deal. Why is this bad? You said even you ‘shop’ products everyday while retailers compete for your business. Why shouldn’t consumers and providers of mortgages be allowed to do the same?

    You confuse what you are ‘earning’ with what your company is charging the consumer. You should know that your company is charging more than what they are paying you so they can pay fixed costs, other labor expenses, match you income taxes, and make a profit. Your company is likely charging at least 300bps and likely a lot more. So your example of 150 bps vs 300 bps is not valid. This is the reason you are earning more and you don't seem to realize that the extra money you are taking comes directly from the consumer and the consumer only. Who is doing the ‘gouging’ now?

    You make more per mortgage now, yet say you don't have to compete with anyone on price. Why would the LO Comp. rule have anything to do with your competition unless Dodd/Frank and LO comp. put all the brokers in your area out of business, allowing you to earn more per mortgage while the consumer pays more.

    Working for a correspondent is the same as working for a bank. You (your company) have the flexibility to price mortgages based the specifics of the mortgage. Brokers cannot, due to LO Comp. rules. Is it 'gouging' to charge 4 points on a $50,000 mortgage? I would say no. Is it gouging to charge 4 points on a $2M mortgage? I would say yes. Yet the LO Comp. rule forces brokers to fix their pricing, preventing them from competing. It has nothing to do with 'making more' and everything to do with competing. I hope you understand this.

    There was no Data, evidence, or study that indicated a LO Comp. rule was even necessary. I'd love to see it if you can provide it. There was no testing or study done to show the LO Comp. rule would have the desired effect or have adverse effects. It was just made up and implemented.

    You make a huge mistake by asking if it makes any difference if you work for someone else, or have the opportunity to work for yourself. Working for yourself is one of the greatest opportunities one could want, yet you are willing to dismiss it and work for ‘the man’. Many smaller companies produce a healthier economy than a few large companies. Better to make the change to level the playing field for all, especially the little guy, not joining companies in which the law has bestowed favor. You must see that we all lose fundamental opportunities when this happens.
  • Proud Broker | | 18 Nov 2014, 09:46 AM Agree 0
    You are so right on, Not Yo' Nanny when you point out the difference between what Mike Shaw earns from a mortgage vs what his company charges the borrower. It is so typical of bankers to forget that what the company is earning is completely hidden from the consumer.
    Your response says it all thoughtfully and honestly while pointing out the failures of the LO comp rules to promote transparency to the consumer. Thanks for taking the time to spell it out to those who see the value of the independent broker to the industry.
  • Proud Broker | | 18 Nov 2014, 09:49 AM Agree 0
    Correction----Thanks for taking the time to spell it out to those who DON'T see the value of the independent broker to the industry.
  • Not Yo' Nanny | | 18 Nov 2014, 03:37 PM Agree 0
    Proud Broker, Yes, and Brokers disclose exactly what their compensation is, banks and lenders do not! Odd that Mr. Shaw does not see that him earning more is his 'additional bonus', and wants others that receive extra earnings to be made an example of. From the consumers perspective, it's the same thing, they still pay! Even if this were the only reason, since LO Comp's supposed 'consumer protection' does not extend to banks and lenders doing 87% of all mortgages, the LO Comp Law is a failure.
  • john R | | 22 Nov 2014, 02:43 PM Agree 0
    Amen!! This is the best post I've seen. Evey other industry, with the airline industry tops, is allowed to run rampant and gouge consumers in whatever fashion they choose. Yet the mortgage industry is crooked. Mind your effing business CFPB!!!
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