QM won't mean mortgage apocalypse, wholesalers say

by Ryan Smith23 Oct 2013

While brokers are worried about the Consumer Financial Protection Bureau’s upcoming implementation of the Qualified Mortgage Rule, along with the potentially profit-strangling 3% cap on fees and origination costs that comes with it. But a panel of wholesale lenders said Friday that neither the rule nor the 3% cap is necessarily the end of the world.

Speaking at the National Association of Mortgage Professionals (NAMB) national conference in Las Vegas, the panel – United Wholesale Mortgage President Mat Ishbia, Carrington Mortgage Services Senior Vice President Rey Maninang and Plaza Home Mortgage Divisional Executive Jeff Leinan – said the 3% cap will take some adjustment on the part of mortgage professionals, but it doesn’t have to be a business-killer.

Ishbia said that United Wholesale had done a study on how the cap would impact its business. “When we did no changes to our plans, less than 5% of our business would be affected,” he said.

Leinan said Plaza got similar results from its own study. “At Plaza we did a full analysis through 2013 ... and based on what we currently know about the rule, we didn't think there was going to be an issue,” he said.
Maninang compared the cap to the “Good Faith Estimate” rule that took effect in 2010 and required mortgage professionals to provide customers accurate bottom-line cost estimates for mortgages.

“There was a lot of paranoia and a lot of anxiety when the GFE rule came out,” he said. “...I think this will be another case where there's a lot of anxiety and it won't be as big a deal as we worried about.”

The panel agreed that although the QM rule isn’t a sign of a pending mortgage apocalypse, it’s still a good idea for brokers to branch out to non-QM products.

“Really the only one that can define (the effects of QM) probably is the CFPB,” Maninang said. “It's important that you work with a lender that has a robust compliance department and a robust legal department -- but it's also important to pick a firm that also offers non-QM products.”

“I’m confident there’ll be a non-QM product,” Leinan said. “It’s too early to comment on whether (Plaza) will carry one.”

They also warned against an increasingly common practice – brokers becoming “mini-correspondent” lenders in an effort to duck QM.

“We all know that a lot of you guys are trying to move into mini-corr because of the 3-percent rule,” Maninang said. “The CFPB isn't stupid, people. ... They're going to see that some people are trying to circumvent the system by having a mini-corr relationship.”

“I think everybody should have options, but you shouldn't be going to be a correspondent because of the QM rule; I agree 100 percent with that,” Ishbia said. “...If you think you need to be a mini-correspondent because of this rule, that's not true.”

“It's a great, viable business option if it makes sense for your business,” Leinan added. “But if you're doing it because you fear the rule, you need to take a hard look at that. ... I think you need to move cautiously and make sure you fully investigate everything.”

Ishbia said that the implementation of the new regulations could actually be an opportunity for ambitious brokers.

“I think it's a very exciting time. With regulation and rates going up, it's a great excuse for people who aren't that good to leave. ... I think it's a great opportunity for people who are here to pick up more market share,” he said. “We've got to do a little bit better, we've got to work a little bit harder. I think a lot of people here will succeed. ... You've just got to outwork everybody, and I bet on the brokers over banks and correspondent lenders every time.”


  • by Bruce | 10/23/2013 8:13:20 AM

    I don't think it's the 3% cap that gives brokers anxiety - it's not knowing what would be included in the 3% cap.

  • by Bob Gillespie | 10/23/2013 9:20:34 AM

    If a Broker doesn't have a basic grasp of QM and the 3% rule by now, it's time to dust off the resume. Every major wholesaler, as well as AllRegs and Calyx, have had ongoing webinars regarding QM. Calyx Point already has the QM Compliance Module in it's system. Every mortgage you input is tested for compliance. To the extent that it's possible with any new government regulation, our industry leaders know what QM says, including the 3% rule. It's just math. I was at the presentation. Each panelist came to the same conclusion: if your comp plan is at 2.5% or less, it's likely every mortgage you close will meet QM 3%, even the smaller mortgages since the cap is higher than 3% under $100,000. So don't go all Chicken Little. Get your information from a credible source, not Frank & Brian. Start today to check every mortgage against the 3% rule. That gives you plenty of time to make your adjustments. Of course, if your comp plan is at a client raping 3%+, your life style IS going to change, as it should.

  • by Carlo Sanchez | 10/23/2013 9:48:56 AM

    Get real Bob, everyone should go Chicken Little and it's mortgage officers like you that should get out of the industry for your lack of knowledge. Right now, and doubt it will change, is that the 3% fees include 3rd party fees.

    The Borrower is the one the ultimate victim here with higher rates to make up for those fees and purchase transactions is where the instant problem comes up with title on both sides so get real.

    What is wroing with making 3pts on a file? 99% of Real estate agents make it without question so why shouldn't a mortgage officer?

    Keep in mind those stupid panels are/were looking at about 75% Refinance transactions - how many of those are you doing today? Purchase transactions with 3rd party fees included eats up the the 3% rule as it stands right now.

    Get Educated bud on the what is happening and you should be worried. The borrower is getting screwed with higher rates now.


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