this was brought to my attention by a client of mine who happens to be a mortgage broker. you may not have heard, but a bill has been introduced in the house (hr 3915) that will effectively eliminate mortgage brokers.
baton online processing has a really in-depth article, and explains how it is ostensibly needed to control predatory lending and why that's not true for the industry. i'm going to try to give you just a little more human interest information. proprietor nation tells his own story - maybe between the two of us we can show you what it means to you and me in the real world...
the two main components of this bill are the elimination of stated income loans and the elimination of yield spread premiums (ysp). the elimination of ysp's would be only for brokers, banks would be exempt from this legislation just as they already are from disclosing ysp information. mortgage brokers must disclose to the consumer that they are being charged a ysp, banks do not.
what is a ysp, you say? according to my client a ysp comes into play in the following scenario:
"If there is not enough room to collect lender and any other 3rd party fees from the borrower in the form of closing costs on a refinance or purchase on the front end of the transaction we have the ability to charge the customer a higher than market rate so we get paid for our services by the end investor. Just another way for us to earn our fee and the customer is given the choice of a higher rate with minimal fees or a lower rate with normal fees. Something that doesn’t need to be legislated as the market will always allow the consumer to shop and determine what is best for their particular situation."
oh, i see the problem now. we can't have people determining what is best for themselves now, can we?
if only banks are allowed to offer a "no cost loan" which requires a ysp option, how competitive do you think the loans will be? not very. will consumers be better served by having fewer choices? i think not. will the economy be better served if a large segment of the industry simply vanishes because they have been put out of business by this legislation? of course not.
the second major provision in the bill eliminates stated income loans. but wait, you say, aren't the stated income loans the reason we're in this situation with the home loan crisis??? no, of course not, but that's what the msm wants you to believe. stated income loans have been around for a very long time and they are only used for a very narrow set of qualifications. from my client:
We do loans for people with high credit scores, lots of verified assets, low loan to value, etc.. without verifying income through traditional means (i.e. tax returns, W2’s and pay stubs) since it a perceived as a low risk transaction. It has been done this way forever for high net worth people that don’t want to hassle with all the paperwork, self employed people that don’t necessarily report all their income on their tax return, real estate investors, service industry people that have a lot of unreported cash income, etc…
as someone who is self-employed, i can tell you that if it weren't for stated income loans i wouldn't own a house. we've used this type of loan a number of times over the years and it's never easy or fast, but it beats the alternative of renting. this type of loan is not given to someone without verifiable assets. you don't just walk in and say "i make $100k a year and i want to buy this house but i don't have proof of what i make" and then they give you a mortgage. it just doesn't work that way. but unless i go get a "j-o-b" and this things passes, i will never be able to buy another house. oh joy.
i think this letter, from a resident of rohnert park, ca, sent to reps lynn woolsey, dianne feinstein and barbara boxer says it best:
November 4, 2007
The Vote on H.R. 3915 is on November 6, 2007 that proposes to eliminate YSP(rebate). Please vote NO on this bill. My industry faces extinction if this bill passes. This bill is also about our rights as individuals to determine our own financial destiny and independence. Who is to say that the government can pass legislation to force us, as homeowners, to take a par rate and possibly pay up-front origination costs? Each individual has their own unique financial plan and tax goal. One year it may be better to take a par rate and pay origination, and another year it may be better to take a higher rate and not pay up-front costs or even somewhere in between. Isn't that why we have financial planners, CPAs, and mortgage brokers? We need loan options tailored made for an individual. That's why we need all sorts of loan options and mortgage brokers to work individually with each unique homeowner in the United States. Let's get real, we were not all created equally in credit status, tax brackets, or finances. If the federal government believes they can cookie cut the perfect loan for everyone, then we have truly lost what America is about Financial Freedom.
Rohnert Park , CA
please join me in signing the petition to halt this legislation. but don't stop there. also call the authors of the bill:
and then call your congressional representatives - all of them.
both houses of our congress sure are up to stupid stuff lately. once again we need to remind them who they work for. the vote is tomorrow so we don't have much time.
thanks, in advance, for your cooperation.