Impending QM rule not the end of the world, say originators

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With implementation of the Consumer Financial Protection Bureau’s qualified mortgage rule inching ever closer, some originators are worrying about how the new regulation will affect their business. Some, however, say they’re not too concerned.

Marc Jalbert, branch manager of Colonial National Mortgage in Boulder, Colo., said he didn’t think his business would suffer too much under the new rules.

“It’s going to hurt a little bit, I think … but it’s really not an issue for our core market here,” Jalbert said. “We tend to do higher priced loans here. It really impacts markets that tend to do smaller loan sizes, so I don’t think that component of it is going to be egregious – but it could affect some people’s ability to qualify.”

Jalbert said his company has been preparing to implement the new rules for a long time.

“We’re having to retool a lot of systems,” he said. “We’re already well ahead of the curve. We’ve already had days of training. We look at it as a competitive advantage to some degree – just being ready to go.”

“I really don’t see it affecting anything with me other than some additional paperwork,” said John Marcoline, branch manager at FBC Mortgage in Crafton, Pa. “…We have pretty decent customers around here. My average credit score around here is 714. I see the random loan here and there maybe being affected … but I’m getting agency qualified mortgages anyway. (There will be issues with) maybe one or two loans a year out of 300.”

Michael Deery, president of Citywide Financial in San Diego, Calif., was also sanguine about the QM rules.

“This one, I think is not a big deal once you look under the hood of the car,” Deery said. “It probably will hurt $100,000 or $150,000 loans a little bit, but down here in Southern California I don’t think we’ll miss a beat. … Will it constrict my business? Yes it will, but what do you do? You adapt and move on.”

Deery also thought smaller companies would have an easier time with compliance.

“Brokers have always been able to adapt really fast to new rules, whereas if you’re with a large company there’s just a lot to change when it comes to compliance,” he said. “Being small means being able to adapt. The lenders we work with aren’t monsters like Wells Fargo or Bank of America, they’re smaller wholesalers with excellent customer service. I don’t think we’re going to skip a beat on conventional loans or FHA or VA loans.”

Despite his confidence, Deery still questions the necessity of the QM rule.

“The market has self-corrected, like it always does. I think this last QM rule is a bunch of nonsense,” he said. “It’s unnecessary. The crisis happened in 2008, right, and this is just now happening. They’re a little late to the party. The market has corrected itself.”
  • Bruce on 12/17/2013 6:48:05 AM

    I feel the last paragraph is correct - the market has corrected itself as it always does. If the mortgage mess didn't happen during an election year we probably would have been better off now. I hate when politicians feel they have to get involved only when it benefits their interest more than the public interest.

  • Mike on 12/17/2013 8:27:36 AM

    Unless you are portfolioing loans this is almost a non issue. We originate FHA, VA, USDA and Conventional which by their nature are QM loans (for the next 7 years or so anyway). We just need to back up our lending decisions with a few extra documents.

  • Bayview Mortgage Inc on 12/17/2013 8:37:26 AM

    I just feel sory for the realestate companies that own their own mortgage companies and title companies. They will have to use their realtor fees posted on the hud-1 as part of the 3 % . so all their loans will go out the door for free.

  • Sal on 12/17/2013 8:51:11 AM

    I agree on all fronts but our issue is when does this behavior stop? How many businesses are run with a governing body telling you how much you can make.

  • John on 12/17/2013 9:06:52 AM

    I am in an area where $150,000 is our average loan amount. This absolutly descriminates against the little guy. Consumers are definitely worse off today than they were 5 years ago by this needless spending of tax dollars on regulations and regulators under the guise of consumer protection. Everything regarding getting a mortgage is more difficult and more expensive with no benefit whatsoever to the consumer.

  • Steve B. on 12/17/2013 9:10:39 AM

    I don't believe you will see the full effect of this rule until the next recession when foreclosures rise. The QM rule invites litigation by unscrupulous attorneys and borrowers who when desperate will agree to litigate even when they know they were vetted during the loan process.

  • Bayview Mortgage Inc on 12/17/2013 9:32:47 AM

    John, You can't make it on 4500 dollars?
    This is why the regulators stepped in.

  • Wrong Headline... on 12/17/2013 10:35:38 AM

    The headline should read "Originators Agree QM will Negatively Affect Low Income Borrowers".

  • Wrong Headline... on 12/17/2013 10:53:14 AM

    Bayview, Faulty Logic. How much do you think the banks make on this loan, even at the same rate? Why isn't this being addressed by QM? Since when does compensation determine the best deal?

  • Please think.. on 12/17/2013 11:03:21 AM

    Bayview Mortgage Inc., Your posts suggest you have a limited knowledge of the broker model. It's likely John's company could get by with less. The problem is the outlawing of pricing flexibility. If your comp plan is FIXED (which the law requires) at say 3%, you wouldn't be able to compete for loans over $150,000, if even then. LO Comp strips competitive advantage away from the broker. QM further limits it. HVCC/AI prevents the broker from determining the best lender for a consumer based on the appraised value. These do not benefit the consumer and still don't address 87% of the originators - Banks. Is this good for consumers?

  • gheinecke on 12/17/2013 11:40:34 AM

    Mr. Bayview I have been on both sides and NO QUESTION that the consumer with loans under 125k is getting hurt. Many times I have had to tweek clients credit, spend hundreds of dollars myself without re imbursement, spend countless weeks of real work to help clients buy. The change of FHA to 2.5 million is horrible and I already have clients writing to Congress and Senators. Big accomplishment for Washington is saving a few billion on budget. Anyone remember how much OBAMA passed on to Feinstein's husband for liquidating post offices. Maybe this is the reason insider trading rule got pushed back 6 months. I bet it is in the billions and I would been happy to do this for 1/2 % for all the country's listings. We pay a salary to a processor and paying taxes to your l/o's I can only assume your average loan is over 150k or you yourself are "backending" the public.

  • Bayview Mortgage Inc on 12/17/2013 12:39:05 PM

    Nope. Tiny broker here and only licensed in 4 states. I charge a point on all loans. So if the loan is 50,000 to 10 million. everyone is only charged a point. If you can't pay the salaries to processors etc. just sub out your processing. Do what the big banks are doing. Send your set ups to india. If you survived this long after the 2008 crash. then you will be fine. just adapt your model to go with the laws.The more you belly ache. the less people listen or care. Remember we are the brokers. One step up from Used car salesman in the publics mind.

  • KKlovestheravens on 12/17/2013 12:55:59 PM

    No Bayview, the regulators stepped in because of greedy Real Estate companies who ALSO own Title Companies AND Mortgage Companies- both of which are TRULY a conflict of interest to the consumer and in NO way serve their best interest. How about doing 50k loans when you can only make 3% on them?!?! How many brokers want to work with someone on a small loan amount when the Government tells you that you can only make 3% or less on that loan? Then what ends up happening on these small loan amount borrowers, I will tell you- their options are cut down on who will do their loan because not many people want to deal with the headaches of a purchase loan with a small loan amount where they are capped on what they can earn. It is all totally socialistic and a total infringement on our capitalistic society and beliefs. The system is already totally overregulated to begin with and with this new, RIDICULOUS legislation going into effect, it will just continue to make it harder for qualified and well-deserving borrowers to get into home loans. Common sense tells you that most lenders are not going to offer a loan to borrowers that they do not think can make the payments (at least since the market crash). Why is it up to the Government to keep sticking its nose where it doesnt belong, especially since almost everyone will agree that the market, and the system as a whole, has corrected itself!

  • Please think.. on 12/17/2013 2:50:30 PM

    Bayview, That's great for you, but just because QM or LO Comp doesn't affect your specific product mix, or business, doesn't mean they are not affecting consumers and businesses elsewhere across this varied country. If everyone took your selfish position and did not support the industry the next law might put you out of business!

  • Rick from No. CA on 12/17/2013 4:54:08 PM

    The lending landscape is getting tighter every month. As the political wheel runs us down, how are we going to pay back the 17 trillion in US debt. With every loan officer and people who work in our industry not making their cut, the government is losing it's tax base from income taxes. Someone send a message to congress to go find another sandbox to play. You are making laws for a few bad apples and spoiling the whole barrel. It's time to loosen up or we will all become homeless. I APPROVE OF THIS MESSAGE.

  • Griff on 12/18/2013 9:00:45 AM

    We adapt or we don't work. The only mindset for an originator these days is adapt.

    The new rules hurt the borrowers with a combination of a low credit score and a small loan under $100K in my market. I simply will not be able to do those loans. The bank can because their true income is not counted.

    Let the banks have the small loans, I'll take the cake.

    As to rules that may shut down real estate owned financing, title, insurance, etc. Go get 'em. I cannot say I've seen a single case where one stop shopping benefits the consumer, including builders who own a mortgage company.

  • Please think.. on 12/18/2013 10:36:38 AM

    QM and the 3% cap should be challenge on the basis of "Disparate Impact" and the effect it will have on minority and lower income borrowers.

  • Dale on 12/18/2013 1:32:04 PM

    Isnt it absurd that a government who cant control itself , wastes billions and billions of dollars and seems to give free money to anyone who claims they deserve it wants to limit how much money a person can make actually working for a living. Hmmm Guess the banks have their hands in the right pockets while us small time folks will get screwed once again simply if for no other reason than we don't have a huge lobby supporting us.

  • Carl G. on 12/20/2013 1:34:56 PM

    Reply to "Please think..."'s comment that the 3% cap falls under the "Disparate Impact" clause - excellent point. These new regulations are like a cat eating itself by the tail. I still believe, though, that the mortgage industry brought all this on itself. Success guru and business philosopher Jim Rohn once pointed out that if you can't or won't discipline yourself, discipline will always, always, be imposed on you by outside forces.

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