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The unlevel playing field: Mortgage originators versus banks

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Mortgage Professional America | 08 Oct 2014, 07:50 AM Agree 0
Mortgage brokers, who served as scapegoats during the financial meltdown, are still facing unfair regulations
  • Mike Shaw | | 08 Oct 2014, 09:06 AM Agree 0
    Is anyone else tired of hearing about the "unfair" rules regarding MLO licensing? I am! For the record, I'm a licensed MLO in 18 states and have been in the business for 17 years. I obtained about half of these licenses through the standard testing procedures and the other half through the UST. I had to complete 24 hours of CE this year because some states have additional required hours.

    Whining about CE hours or bank LO's that don't have to go through this process is extremely non-productive and a waste of time. I tell every customer that I work with that I am licensed and am held to a higher standard than those that work for banks or other exempt institutions, and customers react favorably to this information. How about we licensed MLO's try using this as an advantage rather than complaining about the hand we were dealt?
  • CathyP | | 08 Oct 2014, 09:54 AM Agree 0
    I also agree that I'm tired of hearing complaints of the licensing requirements. What I do have challenges with, is the Borrower paid/lender paid rules as a mortgage broker. I can't be paid by both, which I understand, but I have lost borrowers, who I might want to lower my "percent compensation" to a lower fee, due to multiple mortgages with the same borrower, etc, but I cannot if he/she wants no closing costs. I HAVE to charge the higher fee, due to the structure the way it is. I don't understand that if we stay below the % compensation, we still can't be paid by the lender. This is extremely confusing to the borrower, as I need to show one way of earning 1.75% broker fee with -0- closing costs, or 1% borrower paid, but he needs to bring $4170 to closing just to cover my fee.
    This is crazy!!
  • Joshua John | | 08 Oct 2014, 09:57 AM Agree 0
    What Mike Shaw said.
  • anonymous | | 08 Oct 2014, 10:03 AM Agree 0
    Amen
  • Dave | | 08 Oct 2014, 10:03 AM Agree 0
    What Mike Shaw, CathyP, and Joshua John said.
  • David K | | 08 Oct 2014, 10:04 AM Agree 0
    To this day, I encounter mortgage originators who are either incompetent or sleazy, in spite of the licensing requirements. When I entered the industry in 1979, there was a lot of pride taken in ethical, transparent behavior. Not so much today. The reason supervised lenders have a lower bar for licensing is that their respective regulators have a big sh_t hammer that they employ when they encounter malfeasance. Other than losing your MLO license, what risk do you run? Witness the article yesterday about the two Georgia firms that lost their licenses for employing felons. Supervised lenders can't hire felons (although they may be led by some).
  • Valerie | | 08 Oct 2014, 10:11 AM Agree 0
    Mike,
    I agree with you about the "whining" over the license issues. So what. We have to take test. Big deal! It didn't stop there though. There are still many unfair regulations on us that are worth the "squeaky wheel." For example, our pay. No government agency should EVER have a regulation on how a person is paid, nor how much money they can make. Banks do not have to disclose their SRP, but we have to. We can no longer offer 0 points or 0 costs mortgages because of the we have to disclose. It always looks to the consumer as though we have more closing costs to the borrower than the banks. If my comp plan is 2.5, but I need some wiggle room and want to make .500 less. then my only option would go borrower paid. The problem with that is the "lender credit" can not pay on penny towards my comp. So the client ends up losing, and will have to take any left over comp in the form of a principle reduction (which does not help them at all). This over-regulation they have imposed upon us is a joke! If they really want to go after people who over charge and do nothing for people, why don't they go after lawyers!!
  • Rich Sr | | 08 Oct 2014, 12:43 PM Agree 0
    As a mortgage broker of a small, family run business, I have felt the new wave of imposing regulations. It has had a devastating effect on mortgage brokers and on business in general as many more will line up to face the reality of unemployment in this country. There are alternatives to the Dodd-Frank bill that will allow mortgage officers to be paid fairly, good and acceptable lending to continue, borrowers to be protected, fees and costs to be kept to a minimum, and keep our country from being thrown into any more of a tailspin. The mortgage industry as we know it may come to a screeching halt which is inevitable should more “reform” come to fruition. The belief is that the government, through imposing regulations in this industry and in an attempt to protect the borrower, is seeking to remove the broker from the equation, and the ability for the borrower to have choices. This will surely lead to higher rates and costs incurred by the borrower as the banking industry reigns the roost without competition for the borrower to choose from. Sadly, it is back to the past (as experienced in the late 70's before mortgage options were implemented); keeping the banks in the money, while deterring the borrower from the choices which will benefit their mortgage needs.
    A more clear detailed direction must be delivered by the Fed to overcome the confusion that any new rulings have brought about. KISS (Keeping It Short & Simple) would allow for the investors and the brokers to understand and comply with the changes that have already been implemented and keep everyone on the same page. Overcoming many of the past problematic issues regarding fraud, price steering, and abusive tactics in lending could have been resolved by weeding out the perpetrators and allowing the remaining mortgage companies to continue to operate within the boundaries that have already been established which in turn, protects the consumer. This in and of itself could keep the price of mortgage lending down and the mortgage process at lower costs to the consumer. Paying a mortgage officer on anything other than an incentivized pay plan, has hurt our industry, with many excellent mortgage officers leaving their chosen livelihood in the mortgage industry. Salaries, with or without overtime and/or bonuses, are extremely difficult to quantify as mortgage officers are working both in and out of the office. Paying a mortgage officer on the amount of mortgages that they deliver can be costly to the broker as it does not take into consideration the profits made on each mortgage. There needs to be reasonable, happy medium which will benefit all involved; a win-win-win situation. The borrower wins first and foremost. The broker wins. And the mortgage officer benefits from the closing of another mortgage to EARN his or her fair and reasonable income. There needs to be change and it must benefit all parties involved in the transaction!
  • Broker No More | | 08 Oct 2014, 03:50 PM Agree 0
    Mike , I agree on the licensing issue. After spending 22 years in origination, I bailed due to 2 other regs that prevented me from serving my clients in the best possible manner. I see others have brought up the compensation rules and I agree there also; the rules only serve to confuse borrowers and cost them more to close a mortgage. The other travesty was the Cuomo extortion scheme that led to HVCC. Forcing us to choose the lender before we could order an appraisal. This led to unnecessary delays, inferior appraisals ordered by incompetent AMC's, the choice of the wrong lender when circumstances changed, and increased costs for the borrower. Ordering the appraisal and having it completed prior to selecting the lender was much more efficient and cost-effective.
    I miss the business and my clients, but not the constant unloading of bureaucratic crap coming from people who were never in the origination business. Reminds me of the definition of Bureaucracy: The act of looking for trouble, finding it everywhere, diagnosing it incorrectly, applying the wrong remedies, leading to unintended consequences for someone else to correct. The more you try to fix it, the worse it gets, until there is no return to normalcy from whence you began.
  • gary heinecke | | 08 Oct 2014, 04:03 PM Agree 0
    Cathy get a few lenders and set different schedules through lender paid. Otherwise only way borrower paid can happen is through you as an owner. It does stink but maybe try the alternative.
  • Broker | | 08 Oct 2014, 06:13 PM Agree 0
    I don't disagree that it's advantageous that we are more educated than the average bank mortgage officer. What frustrates me is they don't have to disclose how much they make. Yes, I know correspondents don't either, but it makes no sense. SRP and YSP are the same thing - just with a different name (we all know this was the big banks' attempt to get rid of brokers). It should be a level playing field, regardless of banker/correspondent/broker - I think that's what the interviewees are saying. But Mike is correct - might as well take a negative and turn it into a positive, cause it ain't gonna change anytime soon!
  • SBHarkness | | 08 Oct 2014, 06:37 PM Agree 0
    I agree...what the heck is the purpose of whining about how it's unfair that the mortgage bankers don't have to be licensed and don't have the continuing education requirements...WAH, WAH, WAH! TO TELL YOU THE TRUTH....I HOPE THEY NEVER DO! Why? For the simple reason that it is so painfully obvious to anyone that takes the time to talk with the bank mortgage mortgage officer (preferable before they have met with me), and then coming to talk with one of us. We are licensed, yes, but we are also so much better educated and that stands out to the consumer...they can see the difference for themselves. In all honesty, I make a habit of posting mortgages I was able to close that first went to the bank or Credit Union and were declined on my Facebook business page. I do so in a very UN-in your face manner. Truth is, I want the bank to feel they can turn that client over to me knowing I will get the mortgage approved, and be quiet about it. In addition my fellow licensed Mortgage Broker/Bankers. Take a look at what we earn to the ridiculous amount these unlicensed mortgage officers work for. 30 to 50 basis points for a commission, yet I am about .375 to .500 less in rate and $500.00 or more less in costs.
  • why accountable | | 08 Oct 2014, 09:57 PM Agree 0
    How about any mortgage written by any bank or mortgage originator found to be illegal due to not following statues already in place be immediately Void
  • Dora Griffin | | 09 Oct 2014, 09:10 AM Agree 0
    I don't care about licensing and education; I will happily comply and tout that. Other regulations such as those that charge the lender underwriting fee, some title fees and my broker fee all under my income cap are nothing short of limiting competition so a borrower needs to go to a bank or banker who does not disclose their income.

    We are well on our way to having no brokers as an option for borrowers. It is the intent I'm convinced. There appears to be no way to fight back on compensation or appraisal problems for the broker. Our group gets smaller and smaller and those in Washington see no purpose of having a broker option. All of this is detrimental to the consumer. Again consumers pay and big business receives.
  • CathyP | | 09 Oct 2014, 10:40 AM Agree 0
    Thanks Dora, but we have our broker compensation at the same percentage with ALL lenders we work with, so that there is no issue with Anti-Steering.
  • | | 22 Oct 2014, 10:00 AM Agree 0
    I agree that it is wrong that MLO's are held as the scapegoats and have to deal with more regulation. I also like M. Shaw's response in regards to being able to tell our clients that we are held to a higher standard than banks. That is a great selling point.
    But, yes the compensation rule is where the real problem lies. For MLO's not to be able to compete on a basic level in regards to the YSP and having no options other than Lender Paid or Borrower paid can be a problem. Having to disclose rebate/ysp to a client when banks don't have to seems very lopsided and unfair practice.
    If this could be addressed and ironed out it would be a much more level playing field.
  • Ruben A. | | 10 Nov 2014, 08:08 AM Agree 0
    I understand and agree about the unfairness however, I am much better compensated than any bank MLO I know. It's a trade off and I for one I'm ok with it.
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