Keeping
Tabs on
Financial
Reform
A new consumer bureau
will affect brokers’
business
As the bureau of consumer Fi- nancial Protection takes form, mortgage brokers should pay
attention to developments and know
which have the potential to change
the way they do business. the bureau,
established under title X of the Dodd-
Frank Wall Street reform and consumer
Protection Act, will eventually assume
wide and often exclusive regulatory
and enforcement authority of consumer
financial products, services and offer-
ings, including mortgages.
By Richard Smith
Loan originator
Churchill Mortgage
• Ensure;timely and understandable
disclosures;
• Protect consumers from unfair,
deceptive or abusive acts and
practices and from discrimination;
• Identify;outdated, unnecessary or
unduly burdensome regulations;
• Enforce;federal;consumer;financial
law consistently and promote fair
competition; and
• Promote;access;and;transparency
in consumer financial products and
services.
transfer of oversight was to have
been effective before the start of this
month. the transfer of regulatory responsibility, however, will be implemented more slowly.
Whatever changes the bureau brings,
brokers who adjust quickly and prop-
erly will put their business in the best
position to succeed. •
Richard Smith has joined the churchill
Mortgage team at its new office in chattanooga, tenn. He had been the retail manager
with American Acceptance Mortgage Inc.
for 15 years. He has originated government,
conventional and jumbo loans since 1994.
He lends in tennessee and Georgia. reach
Smith at (423) 899-6898 or at richard@
richardsmithhomeloans.com. Visit www.
richardsmithhomeloans.com for more
information.
By Andrew Weiss-Malik
Chief operating officer
360 Mortgage Group LLC
The Downside of
Retail Temptations
The rewards of leaving wholesale lending
often aren’t what they seem
It is increasingly common for mort- gage brokers with years of experi- ence to move their business to a
retail mortgage bank. When this oc-
curs, brokers often list four reasons for
their decision:
1.;Yield-spread;premium;(YSP): they
don’t want to worry about the regu-
lation of YSP.
2.;Team;consistency: they’re tired of
working with a changing mix of un-
der writers and others.
3.;Net-branch;opportunity: the bank
plans to give them a net branch.
4.;Avoiding;audits: they’ll be able to
sidestep U.S. Department of Housing and Urban Development (HUD)
audits and specific net-worth
requirements.
Although all these reasons may
sound great, brokers should consider
each one more closely before deciding
that a change to retail banking is their
best course of action.
Yield-spread premium
the Federal reserve board announced this past August that it will
ban YSP beginning this coming April.
Moreover, the financial-reform act
signed into law this past July generally prohibits retail and wholesale
residential mortgage originators from
receiving compensation that varies
based on loan terms other than the
principal amount.
In response to long-standing con-
cerns about YSP — a fee paid to
originators by lenders based upon a
loan’s interest rate and other terms
of financing — some retail mortgage
banks created complex formulas
that result in their originators being
paid hourly wages rather than receiv-
ing per-unit compensation. Others
renamed the accounting classifica-
tion of YSP, calling it “gross gain on
sale” or “accrued servicing revenue,”
for example.
changing the name of YSP, however,
isn’t an acceptable solution, and ef-
forts to pay originators by the hour
rather than based on commission of-
ten leave originators unsatisfied and
making much less money than they
previously did.
brokers, however, already switched
from receiving YSP directly from
lenders beginning with the new
real Estate Settlement Procedures
Act requirements this past January.
Presently, YSP is credited to borrow-
ers and then captured by brokers.
complying with the new regulation
is as easy as converting captured
YSP to an origination finance charge.
In other words, brokers could often
make more money by staying on the
wholesale side without having to
make any material changes.
Team consistency
Although the idea of working with the
same underwriter every day may seem
attractive at first, the reality can get
old quickly, especially if you don’t get
along with the underwriter. Working
in a retail operation also often means
you’re stuck with the same appraisal-management team and other service-providers, typically with no ability to
change. If you find yourself dissatisfied
with how a certain department handles
your loans, your only option often will be
to complain to management.
As an independent broker, however, if
you’re unhappy with a lender or service-provider, you can make a change. this
freedom allows you to conduct business with like-minded professionals.
Andrew Weiss-Malik, chief operating officer
of 360 Mortgage Group LLc, has been at the
executive level in the mortgage-banking
industry for 10 years. the first eight years were
spent purely in retail mortgage lending, most
notably with castle & cooke Mortgage. the
past t wo years have been spent exclusively
in wholesale lending at 360 Mortgage. His
daily responsibilities include the oversight of
operations, capital markets and technology
development. reach him at (866) 418-2997
or aweissmalik@360mortgagegroup.com.
