MANAGING DIREC TOR
THE COMMUNIT Y MORTGAGE
BANKING PROJEC T
BY DARRICK MENEKEN
The Community Mortgage Banking Project (CMBP), founded in August 2009, represents
independent community-based mortgage-banking companies, many of which originate loans
through mortgage brokers, according to managing director Glen Corso. He talked to us about
regulatory and legislative changes, broker compensation, and the future of wholesale lending.
How would you describe the climate for mortgage brokers in the past few years?
The climate has been pretty hostile. There are a number of people in Washington, D.C., who
wouldn’t be sorry to see mortgage brokers go away completely. One of the reasons we founded
this group was because mortgage brokers and nonbank-affiliated mortgage companies were
being blamed for everything associated with the mortgage meltdown.
Mortgage professionals are used to change, but nothing in our experience prepared originators and others
along the value chain for 2010, particularly from the appraisal perspective.
Many brokers feel targeted by the Federal Reserve Board’s final rule regarding loan-
originator compensation. How do you foresee broker compensation playing out?
I think you’ll find mortgage-banking companies dealing with brokers on a one-by-one basis.
Some might negotiate a compensation structure they will pay to a specific broker that in turn
will affect the pricing they offer for the loans that broker places with them. Lenders have a great
deal of flexibility in setting different compensation rates among different originators.
First, the Home Valuation Code of Conduct (HVCC)
shook the industry like few new regulations in our history have, with far-reaching impacts for originators and
others at the point of sale. Valuation quality and turnaround times suffered, and if nothing else, the industry
realized the importance of highly accurate and professionally executed appraisals.
Does the Fed’s rule allow lenders to pay net-branch managers for the loans they
originate and also pay them based on their branch’s profits, presuming they ex-
clude the manager’s origination from the profit calculation?
The Fed has yet to give a definitive answer on that. That’s going to affect how net branches get
treated. If the Fed says you can’t do it that way, then managers of net branches won’t be able
to originate their own loans.
The resurgence of Federal Housing Administration
(FHA) lending required the U.S. Department of Housing
and Urban Development to come up with its own set of
appraisal rules. The similarity to the HVCC disappointed
many, but the FHA’s appraiser-independence rules ultimately benefited report quality with provisions for
reasonable and customary fees and prohibitions on
importing appraisers from far outside subject-property
areas because they would work for less money.
Once established, the Consumer Financial Protection Bureau (CFPB) also may
release compensation rules. Will President Obama’s delay in appointing a CFPB
director stifle the bureau’s creation?
Right now, it’s definitely not causing any problems. But the Obama administration will certainly
face an issue during the first or second quarter of 2011, when it will have to nominate a director
and get that person confirmed before the official transfer date for the start of the agency. When
the CFPB comes into existence — likely by July 21 — it needs to have a director in place.
Fannie Mae’s Loan Quality Initiative also took effect
this year. Among other policy changes, it led the government-sponsored enterprises (GSEs) to bar lenders from arbitrarily cutting values to reduce risk. This
means originators have one less deal-killing threat to
contend with, and if a second appraisal is deemed necessary, the lender has to pay for it.
What else should brokers keep their eyes on entering 2011?
Brokers may find that lenders start making demands on them for their compensation plans and
for how they comply with anti-steering provisions. Some brokers may feel that’s very intrusive,
but I think that may become a reality.
Will lenders continue to do business with brokers?
Of the lenders that I talk to that have wholesale as a line of business or exclusively focus on
wholesale, all of them are still very positive about dealing with brokers. They have high confidence in the quality of the loans that brokers place with them.
The GSEs’ Uniform Collateral Data Portal (UCDP) is
another example of how investors are placing new
importance on the appraisal as a linchpin document.
Starting in 2011, lenders must deliver appraisals digitally before the loan purchase. This allows the GSEs
to review valuations before loans are bought, helping
Darrick Meneken is an associate editor at Scotsman Guide. Reach him at (800) 297-6061 or email@example.com.
The most likely impact on originators is more nitpick-ing than normal on loan documentation earlier in the
process, but because the appraisal is the critical document for the UCDP, most of the pressure will be on the
appraiser. Starting Jan. 1, each GSE appraisal must
comply with the Uniform Appraisal Dataset, which
standardizes all key data points required for a complete appraisal.
5 YEARS AGO
The Leading Resource for Mortgage Originators residential edition
From December 2005’s
“The reality is that mortgage brokers are
at the center of the perceived problems
that lead to lending abuses, and they will
face increased supervision and accountability. To survive, brokers must prepare
Finally, the Dodd-Frank Wall Street Reform and Consumer Protection Act promises sweeping changes for
the mortgage industry, and the appraisal sector is no
exception. We know that all appraisers will receive
“reasonable and customary” compensation, must
be geographically competent and will see their work
treated with the professional regard it deserves. Originators should expect some price increases, but careful
shopping of appraisal-management companies will offer opportunities to minimize these.
As Dodd-Frank interpretation takes shape and its countless implications become clearer, there will no doubt be
additional changes in store for the valuation scene.
— JOHN A. LONG,
“HEED THE ALARM”
View this article and others in our free article archive
Volume 12 • Issue 12
Power - with better ways
of doing business
Griff Straw is president of Solidifi U.S., a leading technology-enabled appraisal-management company and provider of col-lateral-risk-management and data-analytic services. He writes a
monthly column on valuation issues for Scotsman Guide. Straw
is a 30-year mortgage banker, a former Freddie Mac technology
executive and a Mortgage Bankers Association Master Faculty
member. Reach him at firstname.lastname@example.org or (703) 496-7579.