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What's goingon in the industry? Points regulations

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T O P I C R E V I E W
jbelmont	Posted - 04/12/2011 : 4:45:14 PM I am hearing that as of April 1st there are some rules effecting how lenders are allowed to charge for points. I heard that they can no longer charge points to the borrowers? But, brokers can? I am confused. Business is dead for many this month, and I'm very concerned. If anyone can explain this to us, taht woudl be super.
4 L A T E S T R E P L I E S (Newest First)
Dannotary	Posted - 04/30/2011 : 9:54:43 PM Yes, I agree it has been slow in the past month and that most loans seem to be coming from the lenders and not brokers. Glad they are cracking down on YSP. I dont think the banks want to loan lately. They have lost their investors. Inventory is even lower because they dont want to put the foreclosed homes on the market. At least in my area of No. Ca. they only put a few foreclosed ones on the market at a time so as to create bidding wars and get the price up. Also many of them have no original paperwork and have recently busted a mill who was supplying thousands of forged documents used to replace the lost documents so those homes are in limbo. IF it continues like this, I can see where local title co's will be doing all the closings and signing co's and signing agents will be finished. So many people have bad credit nowdays (45% with less than 645 credit score) and are under-employed there isnt that many who can qualify for a loan, so what are they going to do about unloading all the homes they are holding? Demolition may become a booming business in near future as these houses rot away.
Renee	Posted - 04/14/2011 : 04:01:31 AM Economics is not my forte', but I really am not seeing why this would affect the number of loans, because it doesn't affect the number of borrowers - though it quite possibly will affect the number of mtg brokers, it won't affect banks. It seemed to me, just from the loans I've been seeing, that banks were already doing the bulk of the business. In a nutshell, the whole reason the Fed's made this change was because borrowers did NOT have much awareness of YSP, let alone the effect on their interest rate (despite disclosures). Taking something away that borrowers rarely knew about in the first place just wouldn't seem to me to affect the # of viable borrowers. YSP was sometimes used to off-set the borrower's closing costs, helping cash-strapped but viable borrowers. Still, banks are certainly ready, willing & able to scoop up that market. In my neck of the woods, EVERYTHING has slowed - it's rare that I would see a brokered loan, but bank loans & cash purchases have also slowed, neither of which would be affected at all by the loss of YSP.
jbelmont	Posted - 04/13/2011 : 8:08:51 PM Wow Renee, that is great information. So, how does this effect the notaries? Will they still get jobs? Its really slowed down since this bill. A lot of lenders really took liberties with borrowers, but many offered good rates too. I hope that loans will still go through.
Renee	Posted - 04/13/2011 : 01:45:36 AM The following regulation went into effect April 1st of this year, concerning Yield Spread Premiums (YSP): Source: http://www.federalreserve.gov/newsevents/press/bcreg/20100816d.htm The Federal Reserve Board on Monday announced final rules to protect mortgage borrowers from unfair, abusive, or deceptive lending practices that can arise from loan originator compensation practices. The new rules apply to mortgage brokers and the companies that employ them, as well as mortgage loan officers employed by depository institutions and other lenders. Today, lenders commonly pay loan originators more compensation if the borrower accepts an interest rate higher than the rate required by the lender (commonly referred to as a "yield spread premium"). Under the final rule, however, a loan originator may not receive compensation that is based on the interest rate or other loan terms. This will prevent loan originators from increasing their own compensation by raising the consumers' loan costs, such as by increasing the interest rate or points. Loan originators can continue to receive compensation that is based on a percentage of the loan amount, which is a common practice. The final rule also prohibits a loan originator that receives compensation directly from the consumer from also receiving compensation from the lender or another party. In consumer testing, the Board found that consumers generally are not aware of the payments lenders make to loan originators and how those payments can affect the consumer's total loan cost. The new rule seeks to ensure that consumers who agree to pay the originator directly do not also pay the originator indirectly through a higher interest rate, thereby paying more in total compensation than they realize. Additionally, the final rule prohibits loan originators from directing or "steering" a consumer to accept a mortgage loan that is not in the consumer's interest in order to increase the originator's compensation. The rule will preserve consumer choice by ensuring that consumers can choose from loan options that include the loan with the lowest rate and the loan with the least amount of points and origination fees, rather than the loans that maximize the originator's compensation