H.R. 3393, a bill brought forth by Republican Congressman Bill Posey, aims to amend the Truth in Lending Act to remove lender compensation from QM
points and fees compliance rules, which would encourage originators to fund smaller mortgages for clients.
“What it comes down to is it’s all about the homeowner,” John Stevens, Utah area manager for Bank of England ENG Lending told Mortgage Professional America. “I think it’s something that if approached in the right manner will pass; so long as they keep the focus on the homeowner the bill will pass because it’s common sense legislation.”
As the Association of Mortgage Professionals explains, originators are dissuaded from taking smaller loan deals under current fee rules because they are forced to take a loss because lender compensation must be factored in to the maximum three percent commission an originator can charge.
The removal of that fee would change the status quo because originators would be able to turn a profit on smaller mortgage loans and, thus, be more likely to arrange them.
And the change would not result in additional fees for clients, according to Fred Kreger of American City Funding.
“The CFPB actually made a comment that payments (to lenders) are already built into the interest rate,” he told MPA.
Still, if the bill does pass, originators will be set to benefit as well because it allows them to originate loans they previously were unable to.
“It won’t affect fees for clients and it will actually make it easier for them to get these loans because they can go to a broker instead of a big bank,” Kreger said. “Right now brokers can’t fund these loans.”
A proposed bill would allow brokers to originate smaller mortgages, which would help low-earners qualify for mortgages and open up a new revenue stream for originators.