Consumer Protection Home Loans 2016 | Home Loan | Home Loan Rates | Getting A Home Loan

Because of our ninja skills, we know you’ve been here before, so why not subscribe to our RSS feed? Many thanks for coming back! So the rep for the bank my company is affiliated with came by last Friday, and we exchanged the usual chit chat, talked about his new baby, and some of the transactions that we had just wrapped up. Consumer Protection Home Loans 2016. Then, from the back of my mind, came a question I had wanted to ask for about a month, but just kept forgetting about due to the hustle & bustle of an abnormally busy November or December.

What the hell is happening with Home Loan Officer compensation in April?We got word a while back that Congress would once again be “protecting the consumer” by regulating the way in which Mortgage Professionals are compensated, but it was just talk. If we reacted to every bit of innuendo that comes down the pike, we would go crazy.US Nat’l Archives Flickr .However, this time it’s for real. Again. Just like “forbidding” Yield Spread Premium, the HVCC, and the “more transparent” Good Faith Estimate (GFE), our friends in D.C. will be inserting themselves into a world they know little about. This is done in the name of consumer protection, but we remain skeptical. As with all things, I could give a rat’s posterior about the intent.my singular concern is results. And the result of this will almost undoubtedly be Low Interest Rates for Home Loan. I suspect the real purpose of this is to once again level the playing field for the big banks, whose costs per transaction are higher than smaller, more nimble lending companies.

Home Loan | Real Estate Loans | Consumer Protection Home Loans | Home Loan Prices | Fixed Home Loan Rates

Details of how it’s going to work out in the end remain sketchy, so I thought I would highlight how some other recent consumer protections are working.1: Yield Spread Premium & the Infinite Madness Way back in 2008, mortgage brokers were allowed to earn money in two ways:Up front fees charged directly to the consumer Rebate paid by the bank. This rebate, or “Yield Spread Premium” (YSP), was valued in direct proportion to the interest rate of the loan. Generally, this meant the higher the rate, the higher the YSP. The “do-gooders” among us would say that this is an incentive to “rip-off” the consumer. And in some cases, they would be right. However, there were some important functions served by the existence of YSP, a couple of which I will go over here.The first and foremost of these important functions was to offset pricing hits. Home Loan Prices hits are determined using the same measure of value as YSP, which are basis points. What is a pricing hit? It is a cost for certain circumstances considered to be less favorable to the investor buying your note. For example, let’s say your loan-to-value ratio (LTV) is greater than 80% and your friend has an LTV that is less than that. You would have a greater amount of pricing hits than your friend, because your higher LTV represents a greater risk to the investor. Not all borrowers have pricing hits, and many loan programs have few hits to consider. However, YSP allowed brokers to cover the cost of those pricing hits without charging more in up front fees to the consumer.Another way Y SP served the consumer was it’s role in the “no closing cost loan”. The originating lender would quote a higher rate (meaning more YSP) in exchange for no up front closing costs. The borrower was of course still paying for all the normal costs associated with closing a home loan the cost is in the form of a higher interest rate, rather than in up front fees. These Fixed Home Loan Rates were very popular with some consumers. Indeed, some lenders advertised themselves as the “home of the no closing cost loan”.Wikimedia Commons Well, the fine folks in Washington, D.C. got rid of this, making it illegal to retain YSP. Going forward, all YSP had to be credited back to the borrower.

That way, evil mortgage companies couldn’t overcharge unsuspecting borrowers in a clandestine manner. Now, it would be more like a shell game. Lenders charge well more than what used to be considered normal up front, then credit back most of that charge in the form of YSP. Here’s how that breaks down: In 2008, if your lender charged 2 points per loan (2 per cent of the loan amount), it would be common practice to charge 1 point up front to the consumer, and then quote a rate that paid 1 point in YSP (after all pricing hits had been accounted for).This was all disclosed on the Good Faith Estimate.Now, if your lender charges 2 points for a loan, the Home Loan Process becomes quite convoluted. Let’s say, for the sake of round numbers, that $200,000 is the amount of the loan in question. To make 2 points, the lender might charge those 2 points up front, and quote you a rate that credits 1 point back to you; thus maintaining the appearance that the loan only cost you 1 point, even though they made 2 points. That’s how it’s done on the broker side of things.And the banks, you ask? Well, the large Home Loan Financing institutions don’t pay YSP. That is what the wholesale banks deal in. The big retail banks have something called “Service Release Premium”, or SRP. The law in question only dealt with YSP, leaving SRP free to roam the housing market. If this sounds like an unfair advantage to certain institutions, we would agree. It should come as no surprise that many big banks were behind the effort to eliminate YSP.

Biphoo

8 Jul 2016

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