Yet again, us mortgage brokers are attacked in the media. This time it's an OP-ED article written by an attorney and Harvard Professor, Elizabeth Warren.
Ms. Warren, although an attorney, has no expertise in the world of mortgage finance. However, this has not stopped her from writing an article calling Y.S.P. a "bribe" from mortgage lenders to mortgage brokers in order to proivde clients with a higher interest rate then what the client actually qualifies for.
Isn't a "bribe" illegal? If Y.S.P were a "bribe" then why would Y.S.P be legal? The article as a whole made me sick to my stomach. As we mortgage brokers don't get enough negative media attention we are once again under attack.
What Ms. Warren does not state anywhere in her OP-ED artcile is that Y.S.P. can be used to pay down a borrowers closing costs as well as allow a mortgage broker to be compensated by the lender by providing a rate that is lower than if a borrower went to a retail lender.
Wholesale rates we mortgage brokers receive are anywhere between .25% and .625% lower then retail rates meaning that as a mortgage broker I can deliver a rate to my client that is less than what my client would have received by going directly to the SAME lender and the lender compensates me for doing so.
Many time Y.S.P. is the only way we mortgage brokers are compensated. Don't auto dealers receive a wholesale price for their automobiles from the manufacturer and then sell their automobiles are a retail price? Don't retail stores purchase their products from a wholesaler so the retailer can sell the items purchased at a retail price in order to make a profit?
There are honest and ethical mortgage brokers who utlize Y.S.P. in order to structure and obtain the best possible mortgage solution for their clients. This article does nothing but hurt those of us in the industry who do the right thing for our clients.
Ms. Warren should be ashamed at what she has done to continue the bashing of the mortgage brokers of this country while using only her opinion to do so!
Thursday, October 4, 2007
Tuesday, September 18, 2007
My Email to the to the U.S. Senate Committee on Banking, Housing & Urban Affairs
Senator Christopher Dodd, (D) Conn, has proposed a Predatory Lending Bill specifically geared towrds mortgage brokers and subprime mortgage borrower in attempt to elimate yield spread premium. As I was unable to locate an email address for the Sentor on his website I sent the following email through a contact form on the Senate Committe on Banking, Housing & Urban Development.
Dear Senator Dodd:
I am writing this email with regard to your proposed predatory lending bill specifically the elimination of yield spread premium. Those outside of the mortgage lending community often time incorrectly define yield spread premium to be the difference between the lowest interest rate a borrower qualifies for, and the actual rate he gets.
As a registered mortgage broker in the state of New York I am greatly disturbed by this proposed legislation. Yield spread premium can be used in order to lower the cost of a closing for many borrowers. For example, on a loan of $350,000, with total closing costs of $6,000, a 1.50% yield spread premium would total $3,500 dollars. If I were to use $3,000 dollars of the yield spread premium to lower the front end closing costs of $6,000 to $3,000 and retain $500 for my service as a mortgage broker, would you consider this to be predatory?
Why should a borrower be forced to pay a broker fee of even $1,000 if the borrower chooses a slightly higher interest rate as the borrower feels it's in his or her best interest to do so? Why should a borrower be forced into obtaining financing through a direct lender when the borrower can retain a substantial amount of savings by working with a mortgage broker and receive wholesale pricing?
Regardless of popular opinion, yield spread premium is not always used to line the pockets of mortgage brokers. There are many mortgage brokers, including myself, that use yield spread premium to the benefit of the borrower. In my opinion, an effective requirement of the bill would be to prevent mortgage brokers from receiving yield spread premium and charge a mortgage broker fee. The bill should propose a mortgage broker is to be compensated in the form of yield spread premium or a mortgage broker fee not both.
Although you feel the elimination of yield spread premium will benefit sub prime borrowers what you're actually doing is making the cost of obtaining financing for sub prime borrowers more costly.
I respectfully request you reconsider your proposed Predatory Lending Bill.
I hate when politicians take a strong stance on something they do not truly understand. Whether he knows it or not, should this legislation pass it will provide less options to subprime borrowers with regard to mortgage financing. I'm awaiting a response but not holding my breathe.
Dear Senator Dodd:
I am writing this email with regard to your proposed predatory lending bill specifically the elimination of yield spread premium. Those outside of the mortgage lending community often time incorrectly define yield spread premium to be the difference between the lowest interest rate a borrower qualifies for, and the actual rate he gets.
As a registered mortgage broker in the state of New York I am greatly disturbed by this proposed legislation. Yield spread premium can be used in order to lower the cost of a closing for many borrowers. For example, on a loan of $350,000, with total closing costs of $6,000, a 1.50% yield spread premium would total $3,500 dollars. If I were to use $3,000 dollars of the yield spread premium to lower the front end closing costs of $6,000 to $3,000 and retain $500 for my service as a mortgage broker, would you consider this to be predatory?
Why should a borrower be forced to pay a broker fee of even $1,000 if the borrower chooses a slightly higher interest rate as the borrower feels it's in his or her best interest to do so? Why should a borrower be forced into obtaining financing through a direct lender when the borrower can retain a substantial amount of savings by working with a mortgage broker and receive wholesale pricing?
Regardless of popular opinion, yield spread premium is not always used to line the pockets of mortgage brokers. There are many mortgage brokers, including myself, that use yield spread premium to the benefit of the borrower. In my opinion, an effective requirement of the bill would be to prevent mortgage brokers from receiving yield spread premium and charge a mortgage broker fee. The bill should propose a mortgage broker is to be compensated in the form of yield spread premium or a mortgage broker fee not both.
Although you feel the elimination of yield spread premium will benefit sub prime borrowers what you're actually doing is making the cost of obtaining financing for sub prime borrowers more costly.
I respectfully request you reconsider your proposed Predatory Lending Bill.
I hate when politicians take a strong stance on something they do not truly understand. Whether he knows it or not, should this legislation pass it will provide less options to subprime borrowers with regard to mortgage financing. I'm awaiting a response but not holding my breathe.
Monday, September 17, 2007
Confessions of a Loan Officer - ABC News
http://abcnews.go.com/Video/playerIndex?id=3600112
The above link is for a video that was titled "Confessions of a Loan Officer." The title should have been "Confessions of a Dishonest Loan Officer."
The video is about 2 minutes long and is about a loan officer who worked for a mortgage brokerage in Virginia that specialized in subprime mortgage loans. The loan officer basically states that he knowingly placed borrowers into mortgages that he knew they would be unable to pay. He also had placed these borrowers into 2/28 mortgage programs where the rate is fixed for the first 24 months but afterwards adjusts to a higher interest rate and payment.
I'm glad that this loan officer is no longer employed in the mortgage industry. Although the name of the company he was employed with was withheld in the video, that company should be shut down. There have been borrowers who were able to get their life and credit standing back because of these programs but nonetheless anyone who is placed into a mortgage they cannot afford will be unable to repay the mortgage regardless of the loan program. Unfortunately, most consumers picture mortgage brokers to be the loan officer in the ABC video. Just as there is a bad element in any industry this loan officer and company was a bad element in the mortgage brokerage industry.
It was interesting to hear the lenders were actually promoting the inflation of the borrowers income. Ask the lenders they will say that they had no idea about what was going on and it's was all becuase of the mortgage brokers that they were taken advantage of which caused so many of the lenders to close their doors in the last year. There are decent hardworking mortgage brokers who care for their clients and take their clients short and long term needs into account when recommending particular mortgage programs. For every one of the loan officers like the kid in the ABC Video, there are at least 5 who would never think about doing what this kid did.
The above link is for a video that was titled "Confessions of a Loan Officer." The title should have been "Confessions of a Dishonest Loan Officer."
The video is about 2 minutes long and is about a loan officer who worked for a mortgage brokerage in Virginia that specialized in subprime mortgage loans. The loan officer basically states that he knowingly placed borrowers into mortgages that he knew they would be unable to pay. He also had placed these borrowers into 2/28 mortgage programs where the rate is fixed for the first 24 months but afterwards adjusts to a higher interest rate and payment.
I'm glad that this loan officer is no longer employed in the mortgage industry. Although the name of the company he was employed with was withheld in the video, that company should be shut down. There have been borrowers who were able to get their life and credit standing back because of these programs but nonetheless anyone who is placed into a mortgage they cannot afford will be unable to repay the mortgage regardless of the loan program. Unfortunately, most consumers picture mortgage brokers to be the loan officer in the ABC video. Just as there is a bad element in any industry this loan officer and company was a bad element in the mortgage brokerage industry.
It was interesting to hear the lenders were actually promoting the inflation of the borrowers income. Ask the lenders they will say that they had no idea about what was going on and it's was all becuase of the mortgage brokers that they were taken advantage of which caused so many of the lenders to close their doors in the last year. There are decent hardworking mortgage brokers who care for their clients and take their clients short and long term needs into account when recommending particular mortgage programs. For every one of the loan officers like the kid in the ABC Video, there are at least 5 who would never think about doing what this kid did.
Friday, September 14, 2007
Mortgage Brokers Unite!
As a mortgage broker, I'm sick and tired of the negative attention we mortgage brokers receive. The misdeeds of some are portrayed as an industry wide epidemic. All I see in the newspapers, magazines and on television is negative press about how a homeowner was duped into a loan they couldn't afford because of a mortgage broker. Sure, there is a bad element to our industry but the same can be said of any other industry.
I can't remember ever reading an article or viewing a newscast about a happy homeowner who used the services of a mortgage broker and was able to save thousands of dollars by doing business with the mortgage broker as opposed to going directly to the bank. For the most part, consumers do not see us as trusted advisers who are acting in their best interest. Many see us as salespeople, trying to make as much money off of a transaction as possible.
I know there are mortgage brokers in our industry that care for their clients the same why that I do. We explain all of the clients’ options, work closely with our clients throughout the transaction, pass our wholesale savings to our clients and provide the personal attention and service we would expect to receive ourselves.
The purpose of this blog is to unite the ethical, hardworking individuals of the mortgage brokerage industry by providing information and insight to the negative media attention we in the industry are receiving. I will respond to as many article and newscasts as possible in order to show how we on the other side of the fence feel about that particular piece of news coverage. Hopefully as I continue to write this blog, consumers will stumble upon it and make their own decisions concerning us mortgage brokers. Welcome to my blog and whether you're a mortgage broker, are employed in the mortgage brokerage industry or are a consumer; please contribute to this blog by leaving your comments.
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