Lender-paid bonuses to mortgage brokers have been common practice for as long as I can remember, and even though I may not remember precisely what happened in the 1960s, I do know YSPs have been around for a long time. Proponents of the YSP, primarily mortgage brokers, say the YSP doesn't make a difference to the borrower as long as the borrower is happy with the rate charged. That's sort of like saying a kid doesn't mind getting kicked in the butt as long as the kid is content to have his butt kicked. Under pressure, the Fed disagrees and has disallowed that practice. And it's about time.
More Articles by Elizabeth Weintraub:
- How to Do a Loan Assumption
- What Are Buyer's Closing Costs?
- Does Your Mortgage Broker Represent You?
Technorati tag: ysp
At the time of writing, Elizabeth Weintraub, DRE # 00697006, is a Broker-Associate at Lyon Real Estate in Sacramento, California.
Comments
Do you relize what is going to happen when over 27,000,000 Mortgage brokers cannot make income anymore? Yes that number is 27 MILLion american employees whom work hard every day to make a small % of commission for a job they deserve to be paid for. If this law is passed and those of you whom think this is a good thing good luck when the GOVT starts telling you that car salesman,attorneys,stock brokers and nearly any sales person in the entire country is not allowed to make commission for there hard work.
This article troubles me greatly and shows the type of uneducated consumer that has absolutely no idea what ramifications this Law is going to create towards our economy. 27,000,000 mortgage brokers will be out of a job because they will no longer have the right to receive commissions for the hard work they do. The average MLO works 50 hrs a week and works diligently towards helping the average individual get approved for a mortgage. This GOV’t is now telling us that a SALES person does not earn the right to make a commission? If this is the case then why allow stockbrokers, attorneys, realtors, car salesman and for that case any individual that works hard to earn a paycheck or commission(Elizabeth Weintraub)? Do this math 27 Million mortgage brokers will be out of a job = destruction of our economy. If people think things are bad now wait until the Govt controls every mortgage in our country and charges you 2.25% up front PMI and an additional .65% per month in MI costs. that means a loan amount of $250,000 your closing costs for that GOVT loan will now have an additional $6,500 in closing cost + another $3750 in 5 years of added MI per month to your loan. For those of you whom think it is a good idea to destroy the commissions of the average Loan officer and put them out of business I feel very bad for your stock portfolio or lack there of one….
KP
The average MLO works 50 hrs a week and works diligently towards helping the average individual get approved for a mortgage. This GOV’t is now telling us that a SALES person does not earn the right to make a commission? If this is the case then why allow stockbrokers, attorneys, realtors, car salesman and for that case any individual that works hard to earn a paycheck or commission(Elizabeth Weintraub)? Do this math 27 Million mortgage brokers will be out of a job = destruction of our economy. If people think things are bad now wait until the Govt controls every mortgage in our country and charges you 2.25% up front PMI and an additional .65% per month in MI costs. that means a loan amount of $250,000 your closing costs for that GOVT loan will now have an additional $6,500 in closing cost + another $3750 in 5 years of added MI per month to your loan. For those of you whom think it is a good idea to destroy the commissions of the average Loan officer and put them out of business I feel very bad for your stock portfolio or lack there of one….
KP
My goodness, Kevin, 27 million mortgage brokers? That’s a scary thought…poor Elizabeth would always have someone knocking on her door 24/7, if that were the case. I don’t know; maybe she already does!
I think the actual number (of US brokers) is probably closer to 1% of that number (about a quarter of a million) and as trying as it may be, this is something from which the US economy could recover if it had to, but it doesn’t. No one is saying the brokers can’t continue to stay in business and make money. They will just have to offer par rates (or better) to the customer and disclose the correct origination charge in the appropriate section of the new Good Faith Estimate…And of course today’s broker will have to continue with his/her continuing education and licensing (similar to the was Elizabeth has to for real estate), which is probably the way it should have been all along…just sayin’.
That’s true, Andy, if there were $27 million mortgage brokers, well that’s closer to the number of the entire population in California. LOL.
I am a mortgage broker and of course my views are a bit biased. I won’t talk about the fact that I started my day from 9:00 a.m. and it is 8:00 p.m. now and I am still in the office. I won’t talk about the 2 exams, one National and one State, that all MLOs now have to pass to do loans. I won’t even mention that if I worked for BofA or Wells Fargo as a loan officer, I will not even need to be licensed by the Dept of Real Estate and pass these exams. And I will definitely not going to tell you that mortgage brokers now generate about 40% of all loan transactions in the U.S.
But I will tell you that by eliminating mortgage brokers, you eliminate competition. I disagree w/ Elizabeth that my customers are content to have their butts kicked. She is comparing my customers to little children — children who are so stupid that they happy to get wacked. By working w/ mortgage brokers, you have choices. You can choose to pay my commission and the discount point to the banks in order to obtain a lower rate. Some prefer not to pay any loan origination points at all and have no problem selecting a higher rate. They all know that there is no free lunch. Banks make YSP too but it does not need to be disclosed and it is called the Service Premium. Banning YSP in my opinion is discrimination against mortgage brokers. We do not have the deep pockets like big banks do to lobby against the Federal Govt. And it is easy to blame the problems on the little people.
Imagine if you have to go to a bank for your mortgage needs, you just cut down at least 50% of lender choices. As a consumer, would you like that?
One last comment/question to Elizabeth: what do you mean by ‘it is about time’? To the contrary of your belief, not all MLO are bad people. And not all of us abuse the YSP and not all our customers are stupid. Under the current licensing requirements, we are held to a much higher standard compared to your other financial advisors. Please do not mislead your audience.
Our government falls short of tackling the real challenges in our country (e.g. health care costs, illegal immigration, corporate corruption, broken family court system, fiscal responsibility, and so on) but has no problem over regulating the banking industry. The government created the financial mess with the housing bubble and the banking debacle. Yet they are the ones stating that loan officers are to blame. At some point the masses have to start realizes we are heading in a very dangerous direction. We are allowing our government to take over every aspect of our lives. I understand we need a certain amount of regulation to prevent corruption and to protect citizens, but it’s gone way too far now. I don’t believe the government should be able to say that loan officers can’t make a commission based on a yield spread. It’s ok for oil companies to price fix while they make billions of dollars but God forbid if a loan officer make a decent living. We need term limits for all political positions. That will help get us in the right direction and stop a lot of the political corruption that is rampant in this country.