Las Vegas Mortgage Loans - The Fed Continues to Make No Sense
The Fed is at it again and making no sense. Politics doesn’t mix with common sense and the Feds latest proposal makes little if any sense. The Fed is trying to put forth new regulations that will require Mortgage Brokers only NOT LENDERS to disclose, before application, what the mortgage brokerage fee and rate on your loan will be. This fee and or rate cannot change under the proposed changes to Reg Z, commonly known as the Truth in Lending disclosure.
As you may know Collen McGrath and myself work for a Mortgage Broker in Las Vegas and in the State of Washington.
Below you will find our individual comments regarding this proposed change:
Comments by Mark Clawson:
Dear Sir or Madam,
I find it incredulous that you have chosen to allow lenders to continue to non-disclose their fees. Isn’t non-disclosure, on the part of lenders, what has caused this mortgage mess that we know have on our hands. Did the lenders disclose how they were packaging their collaterilized debt obligations? Why place your confidence in the lenders and not the many mortgage brokers who chose not to provide loans to unquailifed borrowers?
In many cases, loan officers working for mortgage brokers, actually helped to avoid an even worse mortgage crisis.
The proposed re-vamp of Reg Z where the broker is required to provide the consumer with a “precise” dollar estimate of fees the broker will charge is not well thought out. How can you know the borrowers situation without taking a loan application.
It is through the “precise” accumulation of client data that you are then able to provide the client with a “precise” estimate of fees. I understand the intent but let’s get real. You can’t provide good information to the client without good input from the client. Shouldn’t lessons of the past guide how we approach the future in dealing with the client?
Let’s not let politics dictate changes. What ever happened to common sense?
Comments from Colleen Jane McGrath:
Dear Sir or Madam,
I am writing to express my comments on the proposed Reg Z changes now currently being considered. As a preface, you should know that I was in the business when Reg Z first became a law many years ago (at the urging of Senator Proxmire if my memory serves me well). I tell you this so you have some indication of the years of experience I have in the mortgage industry.
For my first twenty six years in the mortgage business, I worked as a mortgage banker for various companies, primarily bank owned. As an originator I was encouraged to get “overages” to increase my income as well as that of the bank. However, when I became a broker, I was able to use yield spread premiums to offset buyers costs, AND I was able to offer my customer a better rate that he could obtain from a bank.
The differentiation between lenders and brokers has become blurred over the years because, unlike in the past, lenders now package and sell their loans and most often times do not retain the servicing. When the loan is originated by the lender they know in advance what investor they are delivering the loan to for purchase. In essense acting as a broker.
However, lenders, unlike brokers ARE NOT REQUIRED TO DISCLOSE their total compensation. Why is that? How can the consumer be fully served if full disclosure is not required by both lenders and brokers alike? Moreover, how does the consumer know that he is indeed doing business with a lender versus a broker?
There have been several studies which show, on an overall average, that the consumer fares better when dealing with a broker versus lender. Are these studies not being taken into consideration when debating the matter at hand?
The most egregious part of the proposed re-vamp of Reg Z is the requirement for the broker to provide the consumer with a “precise” dollar estimate of fees the broker will charge, especially in light of all of the recent changes in the Secondary Market. It is impossible to provide the consumer with a precise estimate when so many factors can impact the pricing such as:
Credit Scores
Loan to Value
The Income and Financial Statement of the consumer/borrower themselves as it relates to program, fees and rates they will be eligble for when making application.
In essence, the very items needed to make a determination on how best to help the consumer cannot be obtained in advance under the proposed changes. In a time when consumers need more avenues for financing, these proposed changes will constrict those avenues in essence hurting the consumer even more.
There must be other ways for the Federal Reserve to protect consumers in their dealings will ALL mortgage originators, Lender or Broker, and encourage competition that is based on price and service. What can I do to help you pursue these other venues?
I thank you for taking the time to read my comments and would welcome any questions you might have regarding my suggestions.
