I read a blog post today on Cyberhomes blog (an excellent website and blog, by the way). It's latest post is titled "Searching For Good Mortgage Brokers" .
In the post, the author writes, "For people who worry about finding a reputable broker (e.g., one who won't steer you into a loan with hidden exorbitant fees so he can collect higher compensation), there's a website you can try." The website is called upfrontmortgagebrokers.com.
This is the website for the Upfront Mortgage Brokers Association (UMBA). The home page of the website states that it was "founded for consumer advocacy" a noble goal. It also states on the home page "Most professional associations are formed to further the interests of the individuals forming the organization. Members of UMBA are mortgage brokers whose interests are fully aligned with those of the consumer.
Association members believe that, in serving the public interest, they will be working toward a better profession, which, ultimately, will further their professional/personal goals."
I am not a member of this association. This is not an attack on the association or its members. My question is whether this association is relevant any more.
Here is why I ask this question: On the home page of their website there is a link for consumers to click on that says "Why Choose An Upfront Mortgage Broker". On this PDF, it states "the key element of the UMB commitment is the requirement that the fee for the UMB's services be negotiated and established at the start of the mortgage process."
The reason I ask if UMB's are relevant is because of the amount of disclosure that we have to do as mortgage brokers in terms of our compensation.
First, we have to send out a Good Faith Estimate with our fees disclosed. We also have to have separate forms signed that disclose our fees again before we can submit our files to our lending partners. I think by the time we have submitted the file, our clients are very clear in terms or our compensation.
Maybe I am missing something. Again, this is not an attack on upfront mortgage brokers. But it seems to me that the government and our lenders have taken care of consumers in terms of mortgage broker fee disclosures.
Here's a question for you for you mortgage bankers - how come there is no upfront mortgage banker association? Mortgage bankers don't have to disclose how much they are compensated.
I typed in "upfrontmortgagebankers.com" into my browser. It said "sorry page not found".
As a service to my mortgage banking buddies, I went on register.com to see if upfrontmortgagebankers.com is available. It is! Here's your chance to bring full disclosure to consumers!
Do you need help structuring a loan, or getting a rate quote? Call me at (650) 222-0386, or e-mail me.
This is not an offer for extension of credit or a commitment to lend. All loans must satisfy company underwriting guidelines. Information and pricing are subject to change without notice. This is not an offer to enter into a rate lock agreement under any state law.
See http://www.mtgprofessor.com/
EW - I have been on the website - is there something particular you would like me to see?
Phil: Good post. I've heard of things like this. The bottom line is the person. There are people out there who profess to be this and that. But it really gets down to can a person deliver on what they promise1 That's being upfront in my book. Thanks!
Phil,
I totally agree with you. There really is no need for such an organization because the new MDIA and RESPA law that is going into effect on January 1st, will require all lenders and brokers to disclose YSP and our total compensation. It's like having a food company that brags because they disclose the nutritional values of their products...Everybody has to do it anyway now!
Paul - I agree with you also - you don't last long in this business if you don't consistently deliver.
John - Extending this to its natural conclusion, we will eventually have an organization called "afterthefactmortgagebackedsecuritiestraders.com" that will disclose how much they have made on the sale of mortgage-backed securities pools!
Rick,
Most of our lenders require an additional form that states the amount of YSP we will receive. It cannot be increased unless the borrower signs an amended form. Is it different for you?
Thanks for the comment.
Phil,
Interesting post. Mortgage brokers in Ontario have just recently been required to provide additional disclosure and been subject to additional regulations.
Within the last two months almost 100 licences were revoked.
Brian
Rick - I'm glad we see eye to eye as Bronco brothers - thanks for the congrats.
Brian - Wow - hopefully there is more business for you with all of these license revocations.
Phil
The "UpFrontMortgageBankers" didn't go to the trouble of getting the website... they were busy spending the money on buying politicians so they wouldn't have to disclose all of that crap.
Mortgage banker here: I don't know why there is not an upfront mortgage bankers association.
I do not need an association to be upfront with my clients.
I guess we should believe that unless you belong you are not upfront?
What does upfront mean anyway?
Hey Phil -- I totally agree with you, transparency for all.
Phil,
It's important for mortgage brokers to explain the fee disclosures they have to comply with so that the consumer fully understands how transparent they are. This makes them look upfront for sure. Timely point.
UMBA is just another association to drain money from loan officers. LOL
Any lender can be 'up front'.... a very large % of my clients know we make money on the rate we sell....
Hi Phil, A very interesting post. I can not process to much about this subject but being a real estate professional, I like to learn and understand all that can that may in some way benefit my clients. So I read this a couple times to get a good handle but I won't comment specifically, this way or that, as this is the first I've learned of this. But if 1st impressions matter, my impression is that you scored a hit and the mortgage brokers have along with just about everyone else who tries their best to serve the consumer have in fact had laid at their feet a mess that more rightfully ( at least in a proportional sense) belongs more to wall street. Whoever devised hedge funds anyway. Let me guess.............yep, I think I am right!
Lane:
That was a very funny comment. It's so true.
At Inman, they devoted a section to transparency in the mortgage broker model. I will check it out again on the Inman premium service. Thanks for the post and this is a discussion worth more post.
Right! The new revisions to the Truth in Lending Act, namely the MDIA which by the way, (John Neil), were implemented on Jul 30, not January 1, ensure that complete and full disclosure is provided to the borrower. We don't need no silly association to govern this!
Great post!
I really like the new guidelines that took effect July 30th. I think that providing the buyer with documentation that he has to sit on for three days will provide him or her the time to contemplate whether they have concerns and be able to voice those concerns before a decision has to be made that cannot be undone. Although I may be "type A" and not afraid to ask questions, some people are and they need time to be sure they are making the right decision and sometimes, even gain the courage to ask questions at all.
Phil - No where in the new TIL guidelines that just went into effect does it states that mortgage bankers have to disclose their SRP that they're earning on a loan, only mortgage brokers have to disclose our YSP.
Yes, it does state that if the APR changes it has to be disclosed, but mortgage bankers still do not have to disclose their SRP. So, Jamie Woods comment is not completely accurate.
On another note, I hadn't heard of the new guideline that John Neil mentions where all lenders and mortgage bankers will have to disclose their SRP. That will be interesting to see, however, I strongly suspect that in the meantime, lenders and mortgage bankers will be pursuing a tremendously aggressive campaign against anything like that coming to fruition.
Janet - I think upfront implies that the originator discloses how much they will be compensated for the transaction. That is my point of this article - the government and the lenders now require us brokers to disclose our compensation on the initial Good Faith Estimate and on a separate disclosure form that the lender provides before we can even submit the file for underwriting. We are required to be "upfront".
Chris - transparency seems to be the latest buzzword that everybody wants to focus on. On the surface it seems like a good thing, but carried out to the extreme I think it leads to inaction from having too much information to digest. Suppose a real estate agent, spent $3.00 on a gallon of gas to drive his clients to show them a house. His clients love the house and write an offer. But before writing the offer the agent has to present a P and L to his clients showing how much has been spent by the agent in order to get them to this point of writing the offer, in the spirit of true transparency. They then have to negotiate how much commission the agent deserves, so there are two negotiations; one on commission, and one with the seller. Sounds kind of silly doesn't it? But shouldn't that be done in the spirit of true "transparency".
I don't think the playing field is level right now - mortgage brokers have to disclose their compensation, bankers and mortgage bankers disclose the fees upfront, but not how much they get of the totla fees paid. Hopefully it will become a level playing field. However, all this focus on how much someone is making has gotten away from the ultimate bottom line: satisfying clients.
Esko - exactly my point, we have to disclose our fees upfront, so what is the benefit now of being part of the Upfront Mortgage Brokers Association? This is truly a question, not a condemnation of the UMBA - maybe a member can answer this question for us.
Tom - If the UMBA offers some other way to differentiate its members other than being "upfront" with their compensation, maybe it is not just another way to drain money from originators. I just do not know what that is - maybe someone can let us know.
William - thanks for the comment. I think Wall Street will escape this mess with just a scratch - but I think the firms that devised many of the programs that led to the mess we are in deserve as much of the blame as the originators that sold their programs.
Joe - I would love to hear what they had to say at Inman on the mortgage broker model.
Jamie - thanks for the comment. Yes we have our government and they are here to help!
Lane and Carol - thanks for the comments!
Christianne - I don't agree with you about liking the three day period. I disclose the costs before taking the client's application. Waiting three days slows down the process. The less time in the process, the less time we have for something to go wrong - that's the way it usually has worked for me.
Donne - I agree with you - the banks and mortgage bankers will most likely fight back if they are forced to disclose SRP. It should be interesting to watch. If they do fight, it will probably help us mortgage brokers!
Phil.... hhhhhmmmm... here is my honest take on Upfront Mortgage Brokers... as much as I respect Jack Guttentag, I don't like the name of this organization for a main reason.Besides, as Tom Burris mentioned, it costs the loan officer to be an upfront mortgage broker. I have taken a few deals away from upfront mortgage brokers. My reason is, just because they tell you or negotiate what they will charge you, not all of them are very good loan officers. They just work for a fee. It's the same thing that many have tried to model after, when coming up with new online companies or those that write about this in blogs... what is it that they try and start or talk about? Transparency. They try to tell the consumer that they will show you the pricing.
The complaints from the borrowers that ended up going with me were that the loan officer that was an upfront mortgage broker either didn't explain certain procedures very well... where hard to reach (that they didn't return e-mails and or phone calls often), and that they didn't educate the borrower on specific options.
My main complaint to what I just mentioned... I knew one guy that tried to sell a specific model to all lenders and the consumer. For a full doc loan, the lender/loan officer could only make $3,000 total. For no doc loans, $2,000. The problem with this is that service goes down hill. I am not an order taker and that is what the loan officer would become. My clients get a very fair deal which is a very good deal, but not the best deal. What they get is honesty upfront, that I won't bait and switch... that educate them about the process, that I try to be very thorough, that I am easy to reach during the day, evenings, or weekends... that I communicate very well, and that I have integrity. Not saying that all upfront mortgage brokers won't give this kind of service, but I have more than you would think, that they don't. Like I said, I have taken more than my fair share of deals away from loan officers that were upfront mortgage brokers. I know this, because the borrowers told me one of the main reasons that they originally looked for them or went to them was because they would be cheaper. What do we say in the business world? Cheaper is not always better.
Overall, I just think it's another way to make a borrower feel comfortable and that it could distract the borrower from seeing other red flags.
@ Donna.. I don't think I read anything that Phil stated that mortgage bankers must disclose YSP.
I read every comment... Someone else made a comment that stated there is something in the works, that even bankers will have to disclose YSP... from what I heard, they are taking it a step further, to where the gov't wants to ban YSP period. This would hurt buyers more and not help.
Phil... I am not sure you read this, but I talked about the MDIA issue and my main concerns. I hope you don't mind this link. MDIA issues and that it could delay the settlement. I am also going to send this to a friend of mine who is an upfront mortgage broker and he will give you his honest opinion about this. thanks
I don't have a problem with anyone making a fair profit. I have never asked a service provider to lower their fees, even to make a deal work. I do however have an issue with service providers that mislead the public. I think that the lending side needs to be held responsible for their GFE's, advertised rates and Pre-Approval/Pre-Qual letters. Seriously, either the people can buy or they can't. This business isn't as hard as many would like to make it.
I think Amerisave prides themselves on letting the client pick their rate. I think that is a cool aspect of that upfront mortgage lender. I'm not a big fan of YSP. Why not just give the person the lowest rate they qualify for? Why jack up rates? I know some brokers who took huge advantage over some folks behind all the YSP they wanted to receive.
I think that selling real estate and mortgage lending should be separated and made illegal. They do not serve the buyer.
@ Derik... Phil, if you don't mind.. Who cares if AmeriSave lets their clients pick their own rates. Do you think mortgages is that easy? Do you know how many mortgages don't close, even after the lender had 30 days to process the loan? And it wasn't because of the higher rate and or fees, but because the loan officer basically screwed up. Forget about the changing industry. This happens more than it should, and it's because the loan officer doesn't know how to compute income, read credit, look for large deposits, or read a pay stub to find a specific loan, etc, etc. These are things that could kill a deal. By offering the best rate doesn't always mean that the loan will close.
On another note, you stated this. "I'm not a big fan of YSP. Why not just give the person the lowest rate they qualify for?"
So are you telling me that you do every loan for free? You said, why not just give the lowest rate that they qualify for. Sorry, but that statement alone sounds absurd and doesn't make sense. Like you didn't think it through. And you aren't a big fan of YSP? So you would rather all of your clients pay more in points?
Derik..... Please answer this question...Doesn't you and your company need to make a profit? If there was no YSP, that would mean that you would have to charge points no matter what. And in many cases, people barely have enough for the downpayment. You can only try and get so much from the seller in seller help. I am just trying to see your logic. Let me give you a great example...
I am helping a client right now, to where I am giving them a lender credit of $3,000 to make the deal work, to lower his total costs out of pocket. I can only do this because of the YSP. I just don't understand this coming from a loan officer. It scares me on how some think. I will now be writing about this in the next few days.
Phil - I'm with Jeff on this one. Depending on what my clients individual needs are will determine whether they get a par rate and pay one point in origination or whether they pay a little higher rate so that I can cover their lender costs with YSP.
As long as we (LO's) are educating our clients on all of their options, whether it be origination points or YSP, our responsibility is to help our clients decide which option is best for them and their situation. While some clients will prefer to pay points for a lower rate, others will prefer have some of their costs covered by their lender by paying YSP. It's our job to help them decide which option is better for them.
Jeff - I agree with your point that there is much more to choosing an originator than by their claim to being upfront with their fees. If they don't know how to package a file to get it approved, who cares if they are upfront?
I'm not sure where Derek is coming from in terms of not being a fan of YSP - suppose the best loan for the client is a no-point loan? How are we supposed to get paid?
Thanks for the comments.
Damon - thanks for your comment from the real estate side of the business.
Donne - thanks for the comment - I agree with you.
I think this is just another marketing tool. Buyers are welocme to shop in order to get the best deal assuming everyone works in good faith. This is similar to how Saturn sells cars. One price. Ironically, Saturns margins were good because the consumer couldn't negotiate a better deal. If you want to be disclose your margins, that is up to you. Just because you have done this doesn't guarantee the client the best deal.
Patrick - thanks for the comment. It seems to me all designations are marketing tools. My question is does this "marketing tool" mena anything any more since we have so much disclosure on how much we are compensated anyway?