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Terri Buckman
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Terri Buckman VP, Sales Manager |
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Pinnacle Capital Mortgage Corporation 1390 Willow Pass Road Suite 560 Concord, CA 94520 |
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email Terri 925.822.5931 |
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| Comp Reform Dominates CAMP Show Chatter in Long Beach | ||
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| FHA Changes Also a Hot Topic | ||
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| I had to note the irony of the CAMP and CMBA joint show in Long Beach last week. Our quasi merged trade shows seemed like a metaphor for our merging business channels. But it was a happy merger as we increasingly become aware that we are all in this together. We will need to work in tandem to be heard by our legislators to effect change and protect our ability to best serve the consumer while maintaining the ability to sustain our businesses. The show's topics revolved largely around the recent FHA changes and there was much chatter and speculation on the impending changes to loan originator compensation. LOs and lenders were sharing ideas on how we would adapt to this next wave of change. In this post, the following topics, as discussed at the show, will be covered:
CAMP's Federal Lobbyist Lesli Gooch, Ph.D.addressed the convention Wednesday afternoon. Dr. Gooch is with Potomac Partners and is the Federal Lobbyist for CAMP. She gave an articulate summary of CAMP's concerns about the Dodd-Frank Consumer Protection Act. Most importantly, she advised us that a "correction bill" is likely being introduced to correct technical errors in the crafting of the original bill AND she indicated there could easily be "substantive" changes included in this bill as well. The take away here is this battle is not over. Now is the time to be heard. There are 4 areas of main concern with this bill and the related recent Final Ruling out of the Federal Reserve. I will expand on one of the concerns. Read all four of CAMP's concerns here. Preserve Consumer Options for Payment of Origination Fees Situation: The Dodd-Frank Act prohibits the financing of loan originator compensation if loan originators concurrently receive origination fees from the borrower. CAMP's Recommended Request of your legislators: Change the language to allow the payment of origination fees up front and through the interest rate as long as all such fees "were fully and clearly disclosed and agreed to by the consumer earlier in the application process as defined in TILA and do not increase based on changes in the terms of the individual loan or the consumer's decision about whether to finance such fees or charges." Talking Points: The current language will create situations where borrowers will have severely limited financing options to meet their needs. The language needs to ensure that a borrower has the ability to finance closing costs as they deem appropriate for their individual circumstances (i.e. cash available at closing, length of time planning to remain in home, refinance, etc.) Congress should preserve the borrowers' ability to choose low-cost and zero point financing for their homes by financing fees and/or costs into the rate or loan amount, while protecting consumers from hidden charges or abuse. Dr. Gooch and CAMP leadership encouraged us to contact our legislators (they are in district this week) and make your concerns known. As a matter of fact, this Wednesday, August 25th is Federal Congressional In-District Lobby Day. CAMP chapters are organizing visits to local legislators. Contact your chapter GA chair for info. Dr. Gooch told us there are times she is in the halls of Congress advocating for our livelihood and needing us to back her up. The legislators want to know where the CAMP members voices are on the issues affecting us. Through the leadership at CAMP and with Dr. Gooch's efforts, CAMP is building important relationships on the Hill and gaining friends that understand our mission to serve the consumer well while maintaining viable businesses. The Federal Reserve Final Ruling on Loan Officer Compensation Fred Kreger (CAMP GA Chair) and Ken Jones (2010 Broker of the Year) addressed the conference on legislative issues in general and the Federal Reserve Final Ruling on LO Compensation reform, which takes effect April 1st of 2011 (and that is no April Fool's joke). A must read overview of the Fed's Final Rule prepared by Patton Boggs is available here. The Federal Reserve is not yet adopting the similar aspects of the Dodd-Frank Act, but will do so in future rulemaking. So, again the time to weigh in on these changes is far from over. Ken Jones gave this synopsis on LO Comp Reform in the Final Ruling: LO Compensation cannot come from both the borrower and any other source such as the lender. Loan origination charges being financed by the borrower in the loan amount will be deemed coming from the borrower's funds but loan origination charges being paid for through interest rate will NOT be deemed coming from the borrower's funds. ALL loan originator compensation will come wholly from either YSP or SRP (lender) or wholly from the borrower. No mix of the two. As with the wording in the Dodd-Frank Act, this situation is cause for concern by originators that there will be some pricing structures (for example a rate previously available for .5 cost) that will no longer be available for the consumer. This guideline does apply to ALL originators equally. This is an excellent example of an issue we MUST be heard on now while the correction bill is being crafted and while the new Bureau for Consumer Financial Protection seeks to merge and oversee all rulings. We should ensure that the regulations are reworded to allow a combination of monies from borrower and lender, while preventing abuse, to ensure the consumer has the entire range of price options available. OR, we should ensure that at minimum, the consumer can finance ALL origination charges through interest rate as well as loan amount. Further Ken Jones explained that the Final Ruling calls for the pre-agreement of loan originator compensation between creditor/employer and loan originator in any transaction where the compensation is NOT coming from the borrower-see Patton Boggs overview. The compensation cannot be based on any loan attributes including interest rate. It CAN be based on loan amount however. It could be 55 basis points, 75 basis points or 150 basis points, there is no mandatory cap but from a practical standpoint, lenders will probably pick a structure that appeals to their originators and allows pricing to stay under the 3% safe harbor threshold. There is anti-steering language in the Fed's Final Ruling with regard to mortgage brokers that includes a complicated safe harbor provision. Mortgage brokers will have to provide and keep documentation showing that in the event a borrower was placed with a lender that paid more compensation to the originator than other lenders paid, it was indisputably in the consumer's best interest to do so. Loan originators that are employees of lender's will not face this issue. Could this be another factor that may further drive the broker to banker trend? Alternatively, for those remaining independent, a scenario could emerge where mortgage brokers request that all their wholesalers pay them the same compensation scale to mitigate liability in this regard. This would allow the mortgage broker to safely shop their investors on rate and service on behalf of the consumer without worrying about expensive lawsuits to defend their recommendations. In any event, this is another important reason to make sure you are a CAMP member and you are dialed in to CAMP recommendations going forward. Nancy West from Santa HOC on W-2 vs. 1099 status for TPOs originating FHA loans Nancy West, from the Santa Ana HOC, dropped by the FHA Training & Certification Session to field a few questions. Attendees in the class pressed her for answers on whether or not HUD was requiring TPO (third party originators) to be employed (W-2'd) to originate FHA loans for sponsoring DE lenders. She was emphatic that all requirements for origination of FHA loans now fell on the DE lenders, including employment requirements. She also stated that the HUD Approval Handbook, which references employment requirement is referring to the employees of HUD approved lenders only. When asked by the room why HUD had the employment requirement originally, she answered that pre-NMLS licensing, HUD wanted employee status of originators, so that there was a social security number on record with the originator. This gave HUD a way to track loan originators. Now that we have the unique identifier number, required of all loan originators, HUD, and all other agencies for that matter, can drill down with their data to the LO level and identify and track bad players. Switching topics, Nancy threw out this factoid. There are only 1600 HUD REOs in California at present, so basically none. This statistic reflects FHA's late resurgence in California, really only starting back up again in 2008. FHA will no doubt have more REOs in the future as we weather future adverse cycles and if jobs continue to decline, but for now, there really aren't any HUD REOs in this state to speak of. Lastly, Nancy warned us of a new Short Sale scam that involves the holders of seconds and sometimes the asset managers demanding extra cash (under the table) at the eleventh hour from the borrower to close the transaction. She said to be sure to attend your signings or at minimum check with your clients to be sure no one is extorting extra money (typically $5,000 or so). ALL monies must be reported on the HUD-1 and ALL monies going to second lien holders and asset managers must be disclosed to all parties. She urges us to report these incidences to HUD. |
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| Post Date: August 23, 2010 |
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| Will LO Comp Reform fuel the Broker to Banker Trend? | ||
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| Trend Watch | ||
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| The DOC's earlier deadline for NMLS licensing of August 1st, as opposed to the DRE's deadline later this year has caused some minor delays for brokers becoming branches for DOC lenders in California. Couple the earlier deadline with this summer's mini refi boom and well, who has time to study? Be that as it may, we have onboarded several large groups as affiliate branches and they are up and running and enjoying all the benefits of banking just in time for these spectacular rates! Also, slowing the broker to banker trend a bit is the implementation of HUD's rule to open up FHA lending to non-HUD approved brokers. With more lenders now releasing their criteria for sponsorship some broker/owners are feeling more confident about staying independent. This is no doubt a healthy thing for the wholesale channel any way you slice it. The remaining wild card is the impending loan originator compensation reform. It is too soon to say how everything will shake out but it appears there may be some new compelling reasons to consider affiliating with a mortgage banker as a result of the reform. The elimination of YSP being paid to brokers is one issue. Much has been said on this topic, so it doesn't fall under the heading of "new". What has not been discussed as much is the onerous language in the Federal Reserve's position with regard to how brokers select the lenders they choose for their client. For safe harbor from liability from steering, brokers may feel it necessary to place loans with the lender paying them the least compensation. This may compel brokers to partner with one lending source, or at minimum, very few lending sources, to ensure they can get compensated adequately while mitigating exposure to litigation. If you are paring down to one or two lenders, you might want to gain the other benefits of a good banking platform. You will want to read the whole analysis one of our consultants provided, using the Federal Reserve's own language. Download article, entitled "Fed LO Comp-In Their own words", also located on Forms page of this website. See pages 7 & 8 for the prohibition on steering language. As more gets revealed on comp reform and other changes heading our way over the next 12-18 months, we want to remind you we have an excellent affiliate branch program on a very good banking platform for those seeking an innovative business model built specifically to maximize today's opportunities. The most successful transitions to a banking branch model benefit the whole team: owners, originators, processors, your customers and your referral partners too! |
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| Post Date: July 27, 2010 |
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| Be an Industry Expert! | ||
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| What would it take to position yourself as an industry expert? | ||
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| Three things: knowledge, confidence and timing. Confidence comes with knowledge and knowledge has never been easier to obtain. Timing is important, because if you aren't the first to deliver the knowledge, it loses value. To cultivate expert knowledge, you will need good information. Every agency we deal with, has a website and an email, RSS feed, Twitter or Facebook page you can access. You want to get the info direct from the source as they announce it vs. waiting for it to trickle down from your lenders. Plus there are several blogs and publications that can offer great information for you too. Take some time to subscribe to key sources. I recommend you have them sent to a dedicated personal email address, so as not to jam your business account. Huge time saving tip: Use a dashboard service like Netvibes to collect email, RSS feeds, Tweets and FB posts and organize them to your preference. This enables you to read all your sources in one pane. Integrate Facebook and Twitter into your dashboard as these too are becoming news distribution sources for many agencies. Your dashboard is web based, enabling you to access and distribute all your news from anywhere. BTW, it is a free service. Read your feeds in the morning. Keep an eye out for breaking news or articles that you can distribute to your client base and referral partners by email, newsletter or blog. With everything integrated on your dashboard you can quickly share important items via Facebook or Twitter with your social and business networks. Over time, your clients and partners will look to you to get the latest scoop. Being informed not only on topical issues, but issues coming down the pike will help you develop a higher level of dialogue with referral partners and will help you prepare for upcoming changes. Remember, your referral partners are also looking for info to drip down to their client base. Articles written for the consumer on mortgage industry issues are great for this purpose. Great sources: Mortgage Daily, Housing Wire, Mortgage Currentcy, Mortgage Newsclips, National Mortgage News, MBA Newslink, Patton Boggs, www.NAMP.org, eFanniemae.com, Freddiemac.com, FHA Listserv (MLs), VA RLC (circulars), Ken Harney at Washington Post, all MI carriers, FHFA, CAMP, NAMB, Allregs, CA DRE & DOC. Tip: Google agencies you are interested in and look for their RSS feed, Email subscription, Facebook page or follow them on Twitter. |
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| Post Date: July 16, 2010 |
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| DISCLAIMER: My Blog solely represents my own personal opinions and commentary and does not represent the opinions of any corporate entity or other individual. The intent of this blog is to start conversation on topical mortgage issues. This is not advice and should not be acted on accordingly. Further, this information is intended for mortgage professionals only and is not intended for consumers. |
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