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April 5, 2011: The Appellate Court has lifted the stay issued Friday, April 1, 2011 regarding the Federal Reserve Board Rule on loan officer compensation. Previously slated to start on April 1, the stay has now been lifted and goes into effect immediately. It appears that most lenders will accept loans submitted tomorrow, April [...] The U.S. Court of Appeals in Washington, D.C. has granted a temporary stay of the implementation of the Federal Reserve Board’s Loan Originator Compensation rules. The court has directed the defendant Federal Reserve Board to file a reply brief by Monday April 4th. The plaintiffs, the National Association of Mortgage Brokers (NAMB) and the [...] by Amy Avitable, director of compliance services, Sheshunoff Consulting and Solutions As published in Scotsman Guide’s Residential Edition, November 2010. The landscape for mortgage-broker compensation is changing. Are you ready? Here’s a look at what’s coming and how brokers — and their lenders — can evolve their payment models and prepare for the future. * * * The Federal Reserve Board’s final rule on loan-originator compensation takes effect April 1. That date marks the end of an era in how mortgage brokers, mortgage-company employees and even loan officers within banks are paid. The final rule, announced this past Aug. 16, prohibits paying mortgage brokers and other loan originators based on the interest rate paid by borrowers or on any other term or condition of the loan other than the amount of credit extended. As a result, the rule prohibits yield-spread premium (YSP) that is based on the interest rate and interest-rate overages paid to loan originators. For many brokers and other loan originators, YSP has become a common means of getting paid. Because the new rule applies to loan originators — defined as people who arrange consumer credit for compensation — it will cover mortgage brokers, certain employees of mortgage companies and financial institutions, and lenders themselves if they are extending a loan that is funded by another creditor. The rule, however, only applies to closed-end consumer credit secured by a dwelling. Consequently, commercial loans aren’t covered even if they’re secured by someone’s home. Home-equity lines of credit and consumer loans not secured by a dwelling also aren’t covered by the rule, although the Federal Reserve plans to consider whether they should be as it issues more regulatory requirements in the future. Continue reading Broker compensation will soon take on a new look Bureau of Financial Protection created: Loan Originators lose Yield Spread Premium: Brokers better off working with a Bank Affiliate Company if they want to stay in the business. Mortgage Originator Requirements and Prohibitions as outlined in the new law: The Law creates a new definition of “mortgage originator”: Under the Law, a mortgage originator includes persons taking applications, assisting consumers in obtaining a mortgage, or negotiating the terms of a mortgage, but does not include administrative employees, certain employees of manufactured home retailers, real estate brokers unless they are compensated by a lender, broker or other mortgage originator, and servicers or their employees, including those involved in loan modification/loss mitigation. A person “assists a consumer in obtaining or applying to obtain a residential mortgage loan” by, among other things, advising on residential mortgage loan terms, preparing residential mortgage loan packages, or collecting information on behalf of the consumer with regard to a residential mortgage loan. Continue reading Consumer Finance Law Passes April 5th, 2010 The Federal Housing Administration (FHA) announced it will issue a final rule in the next few days to reduce and manage counterparty risks to its insurance funds as it continues to play a critical role in today’s housing market. The new regulations will increase net worth requirements of FHA-approved lenders (including reverse mortgage lenders), strengthen lender approval criteria, and make lenders liable for the oversight of mortgage brokers. “These changes support quality mortgage lenders while excluding organizations that are ill-equipped to handle the risk associated with market variations,” said FHA Commissioner David H. Stevens. “That is particularly important now when a robust, competitive mortgage finance market is a crucial element in rebuilding the American economy. Lenders bear the overall risk of FHA-endorsed loans, therefore it makes sense for them to approve their counterparties and have sufficient capital to operate.” Continue reading FHA Raises Net Worth Requirements to $2.5 million Over Next 3 Years HUD Repeals FHA Origination Fee Cap; Announces New FHA-Related Fee Disclosures. On December 30, HUD issued Mortgagee Letter 2009-53 that eliminates the 1% loan origination fee limit on FHA loans but provides that the FHA will monitor lenders to ensure they are charging “fair and reasonable” fees for all origination services and that [...] The SAFE Act will take effect for Department of Corporation (DOC) licensees in July, 2010, and for DRE licensees in December, 2010. To originate loans anywhere in California (or in the United States, for that matter), each originator who does not work for a federally charted institution must take and pass both a [...] Is the spread a bit too thin?
Among the confusion in complying with HUD’s new RESPA Rules, it is likely no issue has raised quite as much concern as the treatment of Yield Spread Premiums (YSP). As an industry leader, Calyx feels a responsibility to help do part to clear up some of the confusion. We are proud to be the first major LOS to bring the new Good Faith Estimate (GFE) to market (August 2009 with Point 7.1) and through of our close collaboration with HUD, we’re also very confident our implementation is accurate and compliant.
Throughout the design and execution of our 7.2 release this past November, we had the opportunity to analyze and consider many facets of the RESPA Rules and the required implementation changes. We also had a chance to speak with many interested industry participants and through this “in the trenches” experience have discovered several issues we feel the industry needs help understanding. As of January 1, 2010, YSP will ONLY be considered a credit to the borrower. The concept of “front-end” and “back-end” compensation disappears, and all compensation the Originator expects to receive must be clearly indicated upfront, and may not change. This means Originators are required to enter any and all amounts they desire to be compensated in Block 1, “Our Origination Charge” of the GFE. Since originators must include the exact amount they will be compensated in Block 1, YSP does not affect the originator’s compensation directly; it simply reduces the borrower’s closing costs, which may be used to pay the originator’s compensation. Continue reading Where o’ Where Does My YSP Go? by Joshua Weinberg |
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