[caption id="attachment_6363" align="alignleft" width="275" caption="Federal Reserve Board Chairman Ben Bernanke"][/caption]
On April 5, the U.S. Court of Appeals dissolved the stay that had been granted on a delay in the implementation of the Federal Reserve Board’s loan officer compensation rule, putting the rule into effect.
According to Mark Greco, president of 360 Mortgage, the benefit of this court decision is that the waiting is over. He states that anxiety in the broker community about this ruling has been intense for several months and now we know the rule is here and in effect, everyone can go back to work and resume their normal professional lives.
People still need loans.
Greco says, “Yes, this rule is a huge change, but the industry is not going to seize up. There are borrowers who still need loans,” he said. “I know some brokers are going to struggle with this change, but I am equally confident that most will adapt quickly and resume their business as it was on the days and weeks before the rule was implemented. Rates are still low and while the refinance business is down compared to 4th quarter 2010, there is still refinance activity going on. Further, the percentage of purchase transactions have increased drastically and the realtors know that it’s the mortgage broker who is committed to getting the transaction done and getting it done on time. There is business to be had,” he says.
Adapt and accept the change.
“It’s true that this ruling narrows the scope on the way revenue can be earned. That’s uncomfortable for everybody, and it will likely adversely affect borrowers. However, it’s the way of the world today. We are being forced to change, but once we adapt and accept it, perhaps even embrace it, business will be fine, and the sooner the better” he says. “We monitor broker compensation across the country through the transactions that we fund and the average broker compensation, from region to region is between 2 and 2.5 points per loan. Brokers still have the ability to earn that same revenue.”
The rule applies across the board.
According to Greco, the upside for mortgage brokers is that the ruling applies across the board. It doesn’t just apply to the broker industry. It applies to everyone. Given that, he feels that it will be the mortgage broker who will be able to offer more choices to borrowers than a mortgage banker or a loan officer who works for a depository institution.
As with most issues in life, Greco opines, the fear is worse than the realization. This rule change is similar in magnitude to the RESPA change in January 2010, and brokers were just as anxious about that rule change. Once everyone accepted it as the new way and adapted, it was business as usual. Further, the RESPA change was directed solely at the broker community and the rule drastically slanted the playing field in favor of the mortgage banker. That is not the case with this rule.
360 fortifies its strategic commitment to the broker channel.
Greco points to his own decision regarding the future of the 360 and industry overall. He says, “If the management team at 360 was not 100% confident in the viability of the broker’s fate moving forward we would have diversified our concentration out of exclusively TPO or the broker channel and moved into retail. ”Instead, he points out, the company did the opposite. 360 Mortgage terminated its retail channel and devoted 100% of the company’s resources to support the broker community.
Greco continues, “With all of the legislative obstacles that have been thrown in front of the broker—and the FRB compensation ruling is just one—it’s very difficult to take someone from loan application to funding smoothly. We’re still committed to putting all resources toward making that process as efficient as possible and supporting our brokers in their success.”
Going the distance with brokers.
According to Greco, 360 Mortgage cares about brokers, fights hard to get broker business and works hard to help close loans. None of that will change, and the company will continue to forge strong relationships with brokers.
“It’s time to let the healing begin, and realize that the future is bright in the world of mortgage lending. Rates remain low, home prices are low and the economy is showing favorable signs of life. We maintain our positive outlook for growth in 2011 and expect 360 to increase production at least 50% this year,” Greco asserts.