I have two very interesting events coming up this week.
This morning (Tuesday, February 25th) I will be facilitating and moderating a panel discussion on the Consumer Financial Protection Bureau (CFPB) and how it impacts mortgage originators, and consequently, you.
The panelists will be:
- Edwin Chow, the Western Regional Director of the CFPB (the head honcho in the Western U.S.)
- David Luna, owner of Mortgage Educators and former Real Estate Commissioner for the State of Utah
- Fred Kreger, head of the Credit Union Division of American Family Funding, and the current Vice-Chair of Governmental Affairs of the National Association of Mortgage Brokers (NAMB.)
- Bradley Hargrave, an attorney with Medlin & Hargrave specializing in compliance and licensing issues for mortgage originators.
Why is this important to you?
A slew of new regulations came into effect on January 1 which, once again, are creating the need for us in the mortgage origination business to relearn the rules. If it seems that all the new regulations have been spaced out over a number of years, well it seems that way to us too.
We’ve been studying the new rules for months, so this panel will not be focused on what the new rules are, but rather how to comply and how the CFPB intends to enforce them.
For now, the new rules are tightening the guidelines for “prime” mortgage lending, and almost certainly will make everything else much more expensive, plus make it a bit more challenging for your mortgage originators.
For us, it means that we have to figure out how to comply with the letter and intent of the new regulations while still providing the best possible service and the most appropriate product to our clients.
As my Mom used to say, “It’s all fun and games until someone gets audited.” Or something like that.
This is a very potent panel, and we’ve sold out the room of 125 seats, so all of us originators recognize how important these changes are.
Then on Saturday I fly out to Washington, D.C. to be part of a lobbying delegation for NAMB. We’ll be meeting with legislators (and / or their staffs) to talk about issues that are impacting your right to choose where you go for a mortgage and protections for you from undertrained mortgage originators.
There are two issues at stake.
First, when regulators decided they needed to license and regulate mortgage originators the banks were able to carve out an exemption for themselves. Since the four big banks alone write over 60% of all mortgages in the U.S., this means that the vast majority of mortgage originators in the country still do not have to take any class, pass any test, or become licensed in any way.
Mortgage brokers and mortgage bankers, on the other hand, have to take extensive classes, pass a rigorous test administered by the national licensing organization, and the take more classes and pass another test specific to each state that they want to originate loans in.
Our position, while meeting with the legislators, will not be that we think we should not be licensed, but rather that the education and testing was a good thing that filtered out a lot of bad players, and that for the sake of protecting the consumer every originator in the country should have to be educated in the same manner.
You would think that “fees that a borrower pays” would be the fees that borrowers actually pay, but that makes too much sense. Good lobbying on the part of certain players convinced regulators that only certain fees should be counted, and they should be counted whether the buyer actually paid for them or not. And, notably, banks don’t have to count those fees, while brokers do.
The specifics are too complicated and boring to go into here, but the effect of the rule is that a mortgage broker might have to turn borrowers down and send them to a bank to get the loan. In looking at recent samples, I have a client where I could write a 30-year fixed loan for 4.625% at zero points, but the accounting was such that we had to count over 4% as “origination fees,” and we are not allowed to charge more than 3%. A bank offered her 4.750% at zero points, but shows 0% as “origination fees.”
You see my point – the consumer is not well served by these regulations.
I’ll be reporting on both of these events this week and next. Most of the mortgage brokers I know do not object to the new regulations, and certainly we all know why they are in place. As an industry, we proved that we needed regulation.
But we feel strongly that the purpose of the regulations should be to protect the consumer, not to favor one business model over another.
The regulations as they stand reduce consumer choice, create confusion for consumers, and fail to protect consumers from under-educated mortgage originators in more than 70% of the transactions conducted in the U.S.
Wish me luck.
My name is Casey Fleming, and I am a mortgage advisor in California based in Silicon Valley.
NMLS 344375 / BRE 00889527