Hey Guys, There is a new house resolution out there that is going to affect everyone who owns a home or is thinking of buying a home. Basically, the resolution states that the money that mortgage brokers make from the lender for doing a home loan for their clients will no longer be legal. How does this effect the consumer? Basically, the consumer will now have to pay at least a point in origination fees if not more for any loan they want to do. No cost loans will go out the door, because there is no way for the broker/lender to make any money if they can not receive the money on the back end. The petition is simple. Just click on the link below, and all they need is your name and e-mail address. Make sure to mark the private choice which allows them to only validate your signature (no spam e-mails sent by the government). Please take the time to make a statement on the pending legislation that will effect us all......... FYI - If you haven't seen this or signed already... This link is to a petition opposing the new legislation being voted on next Tuesday that would eliminate Broker Rebates (YSP), among other things. Please sign it and pass it along to anyone else you think would be interested. http://www.petitiononline.com/HR3915/
Gotta love the US house of reps, always there to fix things for us, I'm still waiting on the Iraq war and illegal immigration myself . . .
"Basically, the consumer will now have to pay at least a point in origination fees if not more for any loan they want to do. No cost loans will go out the door, because there is no way for the broker/lender to make any money if they can not receive the money on the back end." What a bunch of BS. Mortgage brokers and non-bank lending were a disaster for the nation. Most brokers have gone out of business near me, thank god. Get this straight everybody - if you're using a mortgage broker, you're a loser. Or you have no business borrowing on a house anyway. Vinny 1 - a broker rebate, or yield spread premium or whatever it is called, is nothing but a kickback and it's fraudulent and deceptive because the borrower thinks he's not paying it.
If you're using a broker you're a loser? How is using a "direct lender" better? First off, the "direct lenders" all sell the paper on the open market, so they aren't really direct. They are an intermediary as well. I am a broker, and I can tell you that I beat direct lenders all the time with their own product. I did a purchase loan for a gentleman recently, and when I priced him out, he accepted my offer over the competition. When we were signing the paperwork, he asked me what company we were working through. I told him Bank of America and he started laughing, because the competition was the loan officer at his local Bank of America branch. I beat the B of A loan officer by a quarter percent, and I only charged half a point were as the other guy was charging a point. The reason I only charged half a point was that I was getting yield spread on the back. Sounds like that "kickback" sure fucked my client over. You keep thinking that way though. I would venture a guess that you complain about gas prices and the supposed monopoly that the oil companies have controlling the prices, but you are ready to limit the consumers choices to banks only in the mortgage industry.
I used to work for a subprime company that was a "direct lender", and I quit because they were shady. Along with charging exorbitant origination fees, they would take 3 points YSP which was the most you could get. This would max out the rate offered to the borrower. It was my first mortgage industry job, so when I started I didn't understand what was going on. Once I did, I cut out because I couldn't do that to people who were already in a credit crunch. Wiping out the YSP is a stupid idea, but I can see limiting the amount of money that a broker or lender can make on a deal. This is already a law in each state though, so this seems excessive. On top of that, this seems more like a state issue rather than a federal issue. Keep in mind, the subprime market came into existence because the federal government forced lenders to make money available to low income families that were looking to own property. Everytime they stick their noses into something that they know absolutely nothing about, it turns to shit.
I'm waiting on the exit strategy for the War on Poverty personally..... and the suspense is killing me. I read about a serial murderer and mob hitter that would kill agressive panhandlers when he was out walking... I was cheering him on for a little while... then I came to my senses, such as they are... Regarding the bill to shut down mortgage brokers... shut the little f%*#ers down, they are the poster boys/girls for how well a little money incentive can damage things... I could not believe it when doctors in HMO's were turning away really sick people because they got a bonus at the end of the year, but they were doing it, and those jerks had taken the hippocratic oath so that tells you where people are regarding income versus morality....
No, gas and oil cos. dont bother me much but this whole scumbag mortgage brokerage industry sure does. I owned a biz that closed maybe 3-400 of them since it started in 97 or so. My view is in line with that of a good number of senators and congressmen, and states, that are going to put an end to the worst abuses. YSP is the first target. Seemed like each of these cockroach lenders had a different and deceptive way they wanted it disclosed to fool the borrowers into believing it was paid by the lender to the broker at no cost to them. One of the worst I remember borrowed 25K to pay off 16K in cards. He got 2Kand change cash. Broker got 5K - about half hidden in the yield spread. For a thousand dollars he could have filed bkrptcy. Instead he's converted all this unsecured debt into a lien on his house on outageous terms. It will be interesting to see if the class actions can get around the bankrupt lenders and into the deep pocket IBs, etc..
You are confusing origination points with YSP. Yield spread is strictly paid out by the lender. It does effect the rate in that the more yield spread that the broker gets, the higher the rate must be. However, that is why the consumer should shop around. They also need to pay attention to what their APR is versus their actual rate. If I'm offering a guy 6.0% with an APR of 6.12%, that means he is getting charged a point in origination. He gets offered 5.5% by the competitor, and he thinks, "wow, that's a much better deal"! Little does he know that his APR is 6.25%. What does that mean? Let's say it was a $50,000.00 loan. With my loan he paid $500.00 in origination fees. With the other guy that gave him 5.5%, he paid $3,000.00 in fees. His payment may be slightly higher with my loan, but he is getting more money back than with the other guy. This has nothing to do with YSP though. This has to do with front end costs. I already conceded that there should be limits to the amount that a broker could make on a deal which is in place at the state level. However, there needs to be more due diligence on the part of the INDIVIDUAL to research what everything means. If an individual is unable to even explain what APR is, then they shouldn't be borrowing money in the first place. The reason people get into trouble is because they are too lazy in many cases to even learn what they are getting into. We need to stop predatory lending, but it needs to be done with some common sense. YSP does not stop predatory lending, and it actually has negative implications. If you can tell me how it is a positive factor I'm all ears, but there really isn't a strong argument for it. If the government wants to help people out, they need to lift some of these ridiculous disclosures that they force the mortgage company to disburse with the loan process. Anyone who has ever filled out a loan packet knows that it is ridiculously large. It is so overwhelming, that the borrower either takes the lender/broker at their word, or they get utterly confused and make bad decisions. Nowhere is this more obvious than with the negative amortization loan(pay option ARM).