Yield Spread Premiums. Definition, Disclosure and Depth
November 9th, 2006 Categories: Mortgage News, Yield Spread Premiums
Yield Spread Premiums (YSP’s) have gradually made their way into the American homeowners conscious, rising from relative obscurity.
While this is progress, their use in relation to their intent is still misunderstood, manipulated, and maligned. Although more consumers are now aware that YSP’s are cash rebates Lenders pay for a borrower to accept a higher interest rate than they qualify for…this hasn’t stopped Brokers and Bankers from misusing them as a tool to subjectively and unjustly enrich themselves.
Definition.
Even well educated broker/bankers can’t properly define YSP’s intended purpose per RESPA letter law. As explained in the RESPA Policy Statement, yield spread premiums should be proposed “as a valuable option that permits home buyers to pay some or all of the up front settlement costs over the life of the mortgage through a higher interest rate.”
In reality, YSP’s are shrouded within the complex structure of real estate settlement procedures to principally allow mortgage brokers and bankers the ability to impose higher prices on borrowers for their direct benefit.
Disclosure.
Many broker/bankers will disclose YSP’s in a range of fashions, which may appear to protect the borrower, but appearances are deceiving. A prevailing practice among brokers is to enter a range of 0% to 5%, which leaves the broker with complete freedom of action, while providing the borrower with no usable information.
Other brokers won’t disclose YSP’s until closing, misleading borrowers to believe that the suddenly apparent dollar amount on the HUD-1 ‘is a fee paid by the Lender to the broker/banker for ‘delivering the borrower’. Under this explanation, payment of Yield Spread Premiums would run afoul of the first step of HUD’s test of whether YSP’s could be considered illegal kickbacks or rebates.
If the dollar value of YSP’s that end up in the broker/bankers pocket exceeds a fair value for services baseline, the transaction violates HUD’s test. What is this baseline amount? I don’t know…$3000, $5000, $10,000+ ? How could one justify $5000 in additional undisclosed compensation?
Charging broker compensation fees up-front and via improperly disclosed YSP can be viewed as a violation of TILA.
Depth.
85-90% of all mortgage transactions contain YSP’s.
In almost all cases, they are never presented as an option, according to true definition.
They represent the largest source of compensation for mortgage brokers.
overwhelming majority of borrowers do not need YSP’s to pay up-front settlement costs but are never offered otherwise.
‘This abusive form of price discrimination substantially increases the overall costs to borrowers, imposing a “hidden tax” on home ownership. Unfortunately, individuals who are less educated and less sophisticated about financial matters end up overpaying the most. The misuse of yield spread premiums affects prime borrowers, FHA borrowers, VA borrowers’**…all the way down the line. Even for those with the best credit, yield spread premiums can cost many thousands of dollars in increased financing costs.
The oft-maligned broker segment of the mortgage origination industry bears the brunt of these facts, while bankers can maneuver with perceived impunity, since they ‘are not required’ to disclose YSP. It would be interesting to see bankers held to black letter law and operate under more transparent conditions…rather it would be interesting to see how quickly they changed their business practices. Many in the industry don’t believe it’s anyone’s business what they make via YSP incentives. Their definition states otherwise. YSP’s belong to the borrower, not the 3rd party service provider.
The mortgage industry as a whole is a baseball toss away from moving to an overall transparent policy platform, via legislation, technology, or both. My $.02 says technology starts it and the legislators play pile on. At the end of the day, to not disclose has been rendered deceptive and predatory…words that have a clearly deleterious effect on doing business, whether they are legally reprimanded or not. If you think about it…to speak out against transparency in this marketplace is not the type of opinion consumers or legislators will come to appreciate.
The opening salvos have begun. There will be momentous battles with new weapons and strategies, but like most wars, no one comes out the clear winner, but the landscape will be changed forever.
**Proper Thanks to:
Kickbacks or Compensation: The Case of Yield Spread Premiums By Howell E. Jackson and Jeremy Berry U.S. Senate Committee on Banking Housing and Urban Affairs.
Jeff I am not an expert on mortgages but YSPs just do not sound right at all. So if I’m understanding this right, YSP were initially designed for the borrower to be able to finance some of the mortgage fees, by agreeing to a higher rate and therefore giving the lender additional funds to rebate to the 3rd party as compensation for fees they did not collect in the form of closing cost to the buyer. Thus lowering the borrowers cash to close Is that right so far?
BUT what has happened over time is that the borrower is not even given the choice and the LOs are selling them on their low fees while at the same time placing them on a higher rate and making their money on the YSPs. Am I getting this right?
Now if this is true, how in the world can this be a legal thing to do? I could understand if it was disclosed but I know it’s not in most cases. So what does the consumer do about this?
11/09/2006 by Bryant Tutas
Bryant…I would like to leave the floor open for other brokers and bankers to comment before I weigh back in ;).
You’re reading correct, ill say that much for now….
11/09/2006 by Jeff Corbett
Good idea Jeff. Just wanted to make sure I was on the right track. Hey I just sell houses, this stuff is out of my realm of expertise. But I am a consumer on the mortgage side and need to know.
11/09/2006 by Bryant Tutas
It’s interesting that the biggest problem in the industry right now seem to be Option ARMs adjusting and forcing people, at least in my area, into Foreclosure. These loans offered the highest rebates. Ten years ago, the City of Oakland, CA passed their own Predatory lending laws because folks were being ripped. Then all the Sub-prime lenders pulled out leaving a vacuum for many marginal borrowers in Oakland. Oversite is needed. Too much can hurt the consumer.
11/09/2006 by David Love,CRS,GRI,SRES
Jeff,
I will try to remember to come back and respond better tomorrow as I am too tired to go into length right now. I will point out one thing.
As you already know, Upfront Mortgage Brokers, like myself, will agree on a fee at the beginning and explain that that fee can be paid directly, through YSP, or a combination.
I do keep the GFE as a range in my original disclosures, but that is because at the time the rate is usually not locked (depends on the market and the borrower). I have no real choice there, except to redisclose when the lock is in place. Usually, when the loan is locked, I call or email the YSP.
When the borrower closes, they will already have known how the “split” is and what to look for on the HUD-1 to see that the total equals the agreed upon amount.
This is the best way to operate in my opinion. I hope I made sense.
11/09/2006 by Robert D. Ashby, CMPS, CITRMS
Jeff…. there are some good points, but some that I will have to disagree on.
Opinion is always good. And we talk about educating the average consumer and even sometimes the lender. Much of this bog is your opinion and doesn’t give insight to what some of the good lenders do or even give examples how how one might perceive your explanations.
Example: Lender A charges 2.5 pts on the front of a $300,000 mortgage and receives 2 pts as a YSP. Okay… this would be what you are talking about. This would equat to $7,500 on the front end and $6,000 on the backend. For a grand total of $13,500. That would seem high. Before I get to the next example though, just a question for Bryant Tutas and other realtors. Isn’t there a 6% commission do to the realtors that would be a total of $18,000? And don’t you make usually 3% of that which would be $9,000? Just food for thought. Can’t we lenders say that we do as much work…. and that we actually have more hands on the loan that the costs could be up there? Loan officer, processor, closer, and underwriter. And sometimes more peoples hand in the transactions.
Now….. Lender B. Charges zero points on a $300,000 loan amount. But still gets 2 pts as a YSP, that would equat to $6,000. And from reading Jeff’s blog, that would even be too much. But if I did a refinance, showed the client how to not only save money monthly, but how to incorporate some of this savings into some return plans that could net him $50,000 in 8 to 10 years. And…. still reduce his principal in 5 years that would be $5,000 lower than what he or she currently has. Wouldn’t my $6,000 fee be greatly acceptable as opposed to you straight fee model that you wrote about once before….trying to make it from $3,000 to $2,000 per loan. Does a mechanic charge you a flat fee and then when he runs into problems, has to order more parts, etc etc…have to charge you more?
I think what we have here is a misleading perception. NOT ALL brokers & bankers operate the way that Jeff describes in this blog. And yes, you didn’t say all….you didn’t really say most, but when you read this twice, it does make one think that you are talking about most. Is there abuse out there? YES…. will we be able to ever control all of this? Probably not.
Each state has gone ahead and made some of their rules and laws a little stricter. Example. New Jersey. They have made a threshold of 4.5% for all lenders to not exceed this. Meaning…. on a $100,000 loan, you can’t have more than $4,500 in total charges. Now… this can be confusing, but this is to include all points charged by the lender, any junks fees charged by the lender (aka. commitment fee, processor fee, warehouse fee, etc etc), and lawyers fee and or title closing fee. Yes…. 3rd party fees are included in this threshold that Jeff fails to point out. Now I have to include in this formual other 3rd party fees. Which could reduce my total profit. So… this total of 4.5% in NJ uses both upfront fees and the YSP into the calculation. Now, I will say this though, Bankers don’t show YSP, therefore don’t count this against the 4.5% threshold. But now examples are shown here that might make things a little clearer and not just general comments.
I am sorry that this is long, but I wanted to point out 2 more things that I read from Jeff in here. Jeff Corbet wrote: “85-90% of all mortgage transactions contain YSP’s.” Where did this come from or is this an opinion based on your knowledge? Just curious. 2nd…Jeff Corbet wrote: “The mortgage industry as a whole is a baseball toss away from moving to an overall transparent policy platform, via legislation, technology, or both. My $.02 says technology starts it and the legislators play pile on.” How can technology start something like this when the lenders won’t do a thing until state or federal cracks down and changes the law? Do you think some software company is going to make this change? Maybe a Countrywide or Wells Fargo will rewrite their own software just to be ahead of the game. But in all honesty, how far does one have to cut their price when there is sometimes large overhead. Just an FYI thrown out there.
11/10/2006 by Jeff Belonger
I have just one tidbit of information that was totally overlooked. Correspondent lenders funding a deal in their own name with the line of credit do not even have to disclose YSP, ever (this includes the HUD-1). Is this wrong? Should they not also have to disclose the YSP that they make when they sell the loan to the lender that they have already placed it with?
Jeff and Jeff - You both make excellent points. I believe that disclosure is the best policy. As for the misuse that Jeff C talks about, who is more to blame… brokers or lenders? After all, it is the lenders that solicit the brokers on their programs and how much YSP one can make by using them. I believe that if one is ever going to try to control this situation, they will have to start with the lenders, not the brokers
11/10/2006 by Jason Price
YSP is a very good tool as it allows us to tailor a loan to a customer’s financial needs.
I could go on forever but the current system works quite well when disclosed properly. 85-90% of mortgage SHOULD contain YSP as it is a LESS costly mortgage considering the average hold time (3-4 years).
I’m in favor of transparency and completely against pricing collusion.
11/10/2006 by Brian Brady
I disagree As long as the YSP is diclosed and the customer is getting a good deal there is nothing wrong with it. We all of have families to feed and loan officers who have been in the business for a long time such as myself DONT work for free. If you want to do business for free then good luck to you.
11/10/2006 by Eddy Martinez
More fear mongering…… YSP is a business tool. YSP like everything else can and will be abused. Proper disclosure is an easy remedy and comfort to clients.
Companies that advertise things like “flat fee of only 350″, etc. are only exploiting the ignorance of people that think they can get something for nothing. Age old concept in any form of transaction, nothing different than retailers marking products up 100% then advertising their 1/2 off sale.
You go to great lengths and spend a lot of time slamming fee’s and the costs of getting a mortgage. Would love to see you throw up at least one post describing how you price your loans and the fee’s you charge. Until that time, you’re just comparing apples to….. well uh, nothing actually.
11/10/2006 by A Day In the Life of a Loan Advisor - Tommie W. Gibson
Ahhh good, good.
First off I would like to say that what I have written here is more than personal opinion, much of it was derived directly from the source I cited at the bottom of the post, as well as from protracted conversation and direct involvement with settling actual lawsuits in multiple states district court systems, both class action and individual.
The post is a summary ‘State of the Union’ addressing…if the facts within the post apply to you, beware…if they don’t, you are ahead of the curve. Via Active Rain and the MO of a great majority of it’s members, I would suspect that many do not intentionally fall within the classification of ‘Material Misrepresentation’, ‘Unjust Enrichment’, ‘Unfair value for services’. However, even the best of breed of brokers will still unwittingly trip the wire and may get caught up in a situation they didn’t feel was wrong.
This post is about awareness, not accusation.
Robert….as a UMB, you subscribe to the highest principles and practices that I tend to ‘preach’. Your methods are as solid as they come. As long as you redisclose the GFE 72 hrs prior to closing, you are good. We are exploring a mutual relationship with the UMBA.
Jeff…I will grab your words and address them in italics afterwards:
“Just a question for Bryant Tutas and other realtors. Isn’t there a 6% commission do to the realtors that would be a total of $18,000? And don’t you make usually 3% of that which would be $9,000? Just food for thought. Can’t we lenders say that we do as much work…. and that we actually have more hands on the loan that the costs could be up there? Loan officer, processor, closer, and underwriter. And sometimes more peoples hand in the transactions.”
This is a whole separate discussion…but one worth having very soon. I have mountains of stuff that I would love to discuss with some members of this community.
Wouldn’t my $6,000 fee be greatly acceptable as opposed to you straight fee model that you wrote about once before….trying to make it from $3,000 to $2,000 per loan. Does a mechanic charge you a flat fee and then when he runs into problems, has to order more parts, etc etc…have to charge you more?
You misinterpret what I say, slightly. Tell your client you are charging them $6k and exactly what you are providing them for this fee…A financial plan that will lower their principle balance by an additional $5k and could yield $50k in 8-10 years is a very valuable service and thus seems to justify your ‘larger’ fee. It’s all about disclosure. However, it is a mistake to believe that your client will value your services as much as you do, especially when the actual dollar amount is properly disclosed and coming out of their pocket. Proper, blunt disclosure is the surest way to CYA.
“I think what we have here is a misleading perception. NOT ALL brokers & bankers operate the way that Jeff describes in this blog. And yes, you didn’t say all….you didn’t really say most, but when you read this twice, it does make one think that you are talking about most. Is there abuse out there? YES…. will we be able to ever control all of this? Probably not.”
Most brokers and bankers violate the TILA and black letter RESPA law and don’t even know it. Many of the mortgage professionals that get caught up in the ‘bad’ purportedly never even knew they were doing anything wrong. Unfortunately (for them) this does not exonerate them from anything.
“Each state has gone ahead and made some of their rules and laws a little stricter. Example. New Jersey. They have made a threshold of 4.5% for all lenders to not exceed this. Meaning…. on a $100,000 loan, you can’t have more than $4,500 in total charges. Now… this can be confusing, but this is to include all points charged by the lender, any junks fees charged by the lender (aka. commitment fee, processor fee, warehouse fee, etc etc), and lawyers fee and or title closing fee. Yes…. 3rd party fees are included in this threshold that Jeff fails to point out. Now I have to include in this formual other 3rd party fees. Which could reduce my total profit. So… this total of 4.5% in NJ uses both upfront fees and the YSP into the calculation. Now, I will say this though, Bankers don’t show YSP, therefore don’t count this against the 4.5% threshold. But now examples are shown here that might make things a little clearer and not just general comments.”
I completely understand where you are coming from here. It’s your job to know this stuff and operate within the rules set forth by the State you are originating in. My home state of NC (along with GA) have some of the strictest state level statutes in the Country. Simply explain your quandary to the borrower and justify your cost for service with them. You chose a $100k loan amount…the restrictions you speak of disappear at higher loan amounts..which should be noted.
I am sorry that this is long, but I wanted to point out 2 more things that I read from Jeff in here. Jeff Corbet wrote: “85-90% of all mortgage transactions contain YSP’s.” Where did this come from or is this an opinion based on your knowledge?
Howell Jackson and Jeremy Berry, two Harvard professors, before the U.S. Senate Committee on Banking Housing and Urban Affairs. This post hi-lites some of their findings, and is commonly refered to in current legislative proceedings across the country.
“The mortgage industry as a whole is a baseball toss away from moving to an overall transparent policy platform, via legislation, technology, or both. My $.02 says technology starts it and the legislators play pile on.” How can technology start something like this when the lenders won’t do a thing until state or federal cracks down and changes the law? Do you think some software company is going to make this change? Maybe a Countrywide or Wells Fargo will rewrite their own software just to be ahead of the game. But in all honesty, how far does one have to cut their price when there is sometimes large overhead.
Large overhead is an internal business problem that should and can address internally. Large tiered splits between the house and the employees unecessarily inflates costs and fees for all parties….see Realtor Commissions. 6% divided by 2, divided by 2, and subtract taxes…These ’split’ models reduce incentive and mandate high prices for marginalized services.
‘A piece of software’ that mines correspondent mortgage rate and pricing data directly for consumer access…i.e.
Customer comes to my site and enters their risk based pricing criteria, my software automatically scours Wells, CWBC, WAMU, and select other wholesalers correspondent databases to yield a best results page of par pricing. Now, I don’t care if you’re a banker or broker..or what the law states you have to or not have to disclose…this customer now knows what they qualify for and are armed with very loaded questions. So, lets say they shop another correspondent banker and they quote the same loan, a higher rate with overall higher fees…who is the customer going to choose? Can the banker deliver better or match the offer? Sure, but what is their explanation for the first ‘offer’? I didn’t have to disclose what you really qualified for? Of course this wont be the explanation, but my communities clients will understand this to be the case.
Brokers have a chance here to seize significant market share from the bankers who believe they are immune from all of this.
As word spreads, more and more bankers will get caught-up in what is perceived as lying (material misrepresentation) by borrowers in the middle of a transaction, and more detrimentally, post transaction, and then the sh*t hits the fan. Legislation and legal proceedings start with consumer awareness…we plan on providing the ‘awareness’, the consumers, blood thirsty attorneys, and legislation will follow.
The wholesale lenders don’t have to do a thing to their policies…they keep putting out and delivering rates just as they always have…it’s the bankers and brokers who will be playing the tenuous game if they choose not to be 100% transparent in their dealings. If you don’t think the big wholesalers have their eye on what we are developing as a way for them to wear the ‘white hat’ and distance themselves from potential broker/ banker liabilities, best think again.
It bears repeating that Bankers are most at risk here…for once the Veil is dropped, it can’t be picked back up again…
Welcome to the world of true transparency in the mortgage industry. Reasonable fixed fee’s for services provided, not dictated by me, but by the open market.
My fee suggestions are just that, suggestions. I ran my brokerage from 35 LO’s down to 2 LO’s…my fees decreased, my profit margins and business increased…This was such an anomaly to anyone I showed it too, I decided to take it to a larger stage. Any ‘nouveau’ sounding strategies and concepts I layout on my blog and other communities, have been practiced and successful in real life, and not just by me…I can attach a laundry list of brokers who practice what I preach and have begun to discover literal word for word content from my postings in other online brokerages ‘About’ pages and business process model descriptors. They are due to receive notes asking for proper citation
11/10/2006 by Jeff Corbett
Eddy…. I am not here to harp the point but you did bring up one point that I meant to talk about.
Anyone selling a loan as a broker to any wholesale company has to disclose the YSP both on the initial good faith and the final HUD. Absolutely have too. And the lenders will not to closing docs until this is completed. So, Jeff Corbet, does anyone have real numbers on the percentages of brokers and bankers/correspondents? Meaning… What are there the most of out there in this industry. My guess would be there are more than 50% brokers out there than bankers/correspondents. Again, just my food for thought.
11/10/2006 by Jeff Belonger
Tommie…here are some apples:
http://thexbroker.com/blog/xbroker-what-it-means-to-you.php
http://thexbroker.com/blog/the-disturbing-truth.php#more-135
http://activerain.com/blogsview/16414/Fiduciary-Principles-in-a
The ‘fear mongers’ are two Harvard Professors and the US Congress (amongst many other local legislative appellates). YSP may be used as a business tool, but it’s purpose has been clearly defined, again, not by me. And, what am I trying gain by ’scaring’ you? I’m not trying to sell anything to this community or profit from my posts, using fear as a tool? Rather they are for brokers, bankers, and real estate professionals as a whole, to understand the business they are in and be mindful of the practices they implement.
I have never, ever said that YSP’s were bad, shouldn’t be used, need to be done away with etc etc…
Rather they are, way more often than not, wielded and defined the wrong way…which opens one up to substantial liability.
Proper and timely disclosure, as Robert practices, needs to be the prevailing practice to avoid future rotten apples.
11/10/2006 by Jeff Corbett
JeffB…Its my understanding that brokes account for 2/3rds of mortgage originations and far outnumber banker/correspondents in a head count.
11/10/2006 by Jeff Corbett
This crap is really getting old; this is the same old argument, twisted a different way
11/10/2006 by Brian Brady
and still grossly misunderstood….
11/10/2006 by Jeff Corbett
Excellent, so the way I read your apples, In return for someone signing a contracting binding them to work with you and no longer shop the loan, you will agree to:
-disclose all fee’s (isn’t that just following the law?),
-provide a copy of the wholesale lender’s rate sheet (I know of no wholesale lenders that allow for public distribution of their wholesale rate sheets, is this just different here in Texas?)
Howell Jackson definately comes with credintials. I’m sure he’s paid handsomely for his testimony as an expert witness in the many class action suits he’s been involved with targeting Brokers. His most noted testimony, which you refer to in this blog was a losing effort.
11/10/2006 by A Day In the Life of a Loan Advisor - Tommie W. Gibson
Not publically distributing wholesale rate-sheets…just to clients who are ‘buying ‘ the product.
Transparently disclosing all fees is the law, and rarely practiced, in TX and beyond.
We have taken proactive steps to position ourselves at the ethical forefront of this traditionally unethical industry, and encourage all other willing brokers and bankers to do the same.
Nothing I write about or implement in my businesses dealings are new or particularly clever…It’s ironic how being bluntly honest, staying in tune with the underpinnings of the industry, improving an industry’s antiquated business processes efficiencies, for the direct benefit of the consumer (and my chosen affiliates), gets one labeled as a fear monger. It’s ok though, Ive been called worse by better….
Many people don’t understand how to implement a model such as the general one I have suggested effectively. Without proper and thorough discourse, simply changing pricing policies without an infrastructure adjustment would sink a business…trying to fit a square peg into a round hole will not work. I can’t reveal all the nuances of how our model ‘works’ publicly at this time. As Ive said, it’s not revolutionary by definition. Rather, it is a matter of evolution and a chosen path of least resistance.
Jackson and Berry’s study was empirical, based on the facts laid before them Tommie…The lawmakers and legislators prefer to rely on qualified opinion driven by factual data…like their findings or not, we have to accept them. Ignoring or discounting them is a risky option.
11/10/2006 by Jeff Corbett
Hi Jeff Belonger,
“Just a question for Bryant Tutas and other Realtors. Isn’t there a 6% commission do to the Realtors that would be a total of $18,000? And don’t you make usually 3% of that which would be $9,000? Just food for thought. Can’t we lenders say that we do as much work…. and that we actually have more hands on the loan that the costs could be up there? Loan officer, processor, closer, and underwriter. And sometimes more peoples hand in the transactions.”
I have no problem with brokers charging whatever they want, as long as it is disclosed. Disclosure is the name of the game. If your consumer knows what they are paying then all is well with the world. If not, well then they are getting screwed. I have personally mortgaged properties about 20 times AND HAVE NEVER had YSP explained to me or disclosed to me except at closing and on the HUD where it briefly mentions something about YSP 0-5%. So what’s up with that?
11/10/2006 by Bryant Tutas
Bryant…Were you ever told you qualified for a lower rate? Were you given the option to pay the YSP on the front side of the transaction as part of broker compensation via cash or equity?
11/10/2006 by Jeff Corbett
Jeff, never. YSP has never been mentioned or explained to me.
11/10/2006 by Bryant Tutas
Misinformation:
1.)In regards to giving wholesale rate sheets to the general public I wasn’t talking about sticking them under windshield wipers in the parking lot, I was referring to giving them to anyone unlicensed. I called a couple Account Executives I have worked with in the past and they deemed it unethical and against broker/lender agreements 100% of the time. You might want to review the policies of your lenders before promising clients something you may not legally be able to provide. If you come across a lender that allows for distribution of their wholesale rate sheets, even to people that are getting a loan with you, please take the time to post them here. I’m interested to see if these AE’s down here just don’t know what they’re talking about.
2.)In your blog you wrote “85-90% of all mortgage transactions contain YSP’s.”
This is not what Mr. Jackson stated. Howell E. Jacksons’ findings and statements to the U.S. Senate Committee on Banking, Housing, and Urban Affairs in regards YSP were a study he had done on 3000 loans all written from one lender or that one lenders affiliates. Here is a copy of his statement and it’s disclosures. http://banking.senate.gov/02_01hrg/010802/jackson.htm
3.)”The ‘fear mongers’ are two Harvard Professors and the US Congress”
As I mentioned in my earlier comment, this was a losing effort for Mr. Jackson. The US Congress has an OPPOSING viewpoint on this.
4.) You wrote;
“It’s ironic how being bluntly honest, staying in tune with the underpinnings of the industry, improving an industry’s antiquated business processes efficiencies, for the direct benefit of the consumer (and my chosen affiliates), gets one labeled as a fear monger.”
That is fallacious on several accounts, first off I didn’t call you a fear monger. I accused Howell E. Jackson and the other hired guns of class action attorneys targeting brokers for massive financial gain of fear mongering. Secondly, being “bluntly honest” (see misinformation 1,2,3,4)
I couldn’t agree with you more when you wrote;
“The lawmakers and legislators prefer to rely on qualified opinion driven by factual data…like their findings or not, we have to accept them. Ignoring or discounting them is a risky option.”
The lawmakers and legislators found Mr. Jacksons’ assessment of YSP wanting. I agree with their findings. I feel alone by not ignoring them or discounting thier findings in this conversation.
Don’t confuse my extended posts with you “touching a nerve”, or classifying you as “rapine”. I close loans for a living, and if I feel like someone is attempting to roll my profession under the bus I definitely want to put a couple cents in the jar. Not to mention it’s good for 25 points on AR:)
Broker Bryant- I doubt very seriously that anyone charged you YSP. While it may have shown up at 0-5% on some of your disclosures it’s probably just their settings set up for their protection in the Caylx system. Anyone that would charge a Realtor of your status any YSP without discussing it with you would be committing industry suicide.
11/10/2006 by A Day In the Life of a Loan Advisor - Tommie W. Gibson
Here we go again. Positioning the model to appear as the hero to the Realtor community on Active Rain!
We all disclose our YSP, Jeff. It’s the law. We were taught that in our licensing courses. We do it within three days of application or credit pull (the sooner of the two).
Everybody says the same exact thing on these posts!
Lenders lend money and sell to Wall Street. Correspondent lenders are called lenders because they lend with their (albeit borrowed, like a bank’s) money . They’re not brokers. They assume credit risk and as such can keep the loan or sell it. THAT is why they don’t disclose YSP.
11/11/2006 by Brian Brady
We all…?
Everybody…?
They assume credit risk and as such can keep the loan or sell it. THAT is why they don’t disclose YSP?
Ehhhh…no.
If they ‘assume the risk’ they get paid the monthly interest, or receive SRP for selling it. YSP has nothing to do with risk, at all.
Tommie:
2. Incidence and Magnitude of Yield Spread Premiums Are Extremely High. Another erroneous factual assumption implicit in the Policy Statement is the notion that yield spread premiums are paid by a relatively small number of borrowers who lack adequate resources to pay closing costs directly. To the contrary, my study indicates that the vast majority of borrowers pay yield spread premiums - on the order of 85 to 90 percent of all transactions.(7)
?????
I’m not rolling your (and my) profession under the bus…I’m trying to push it out of the way from getting run over, backed over, and re-run over by the bus.
11/11/2006 by Jeff Corbett
Anarchy in the RE – it’s about time!
I must say that I have truly enjoyed watching this showdown stage itself. I’ve read every post within this particular thread, and although I’d like to say it’s intriguing more than entertaining, I cannot. This banter is nothing more than a bias pissing contest between industry insiders who fear a revolution coming – one of consumer awareness. There is no consumer caucus present with adequate representation. Moreover, I see even less opinion that holds water from the outside investment and finance sectors that have seen similar legislative, but more importantly, cultural paradigm shifts. Thanks for the invitation!
With that said, I like to expand on few issues, but reserve the brunt of my flogging stick for Wednesday.
First, the augment of justifying the “hard work” or better termed “grift” mortgage brokers do for their dig in relative proportion to the 6% charity paid to realtors has one fundamental flaw… the realtors have not conned the market into believing that the brokerage community actually has “control” over wholesale rates. Why do you think your CPA (Cost per Acquisition), regardless of your marketing medium, has gone from $450 a lead two years ago to over $1,500 today - because you created a perception that forces 8 out 10 prospects to shop you. Realtors on the other hand, although most are lazy and sit back during the bull market and collect gratuity, are subject to the pricing set by the buyer and the market conditions. The equivalency would be allowing realtors to list a home without disclosing the price, only to hock the buyer for a subjective figure while they’re on ether. (I’ll defer to the Starbucks analogy)
Second, what you are all afraid of is more than a correction, but a collision – one of technology and marketing that puts the power in the hands of the consumer. Welcome to the long list of forgotten souls that line the hallways of every industry from travel to stocks. Yes, this is the beginning of the ousting of middle management in the 80’s for your sector. You see, IBM is going direct and Ingram Micro is about to tank. Why, because you have no brand equity without being in the middle, and that means no value!
If any of you were smart, which a few of you seem to be, I would put your egos aside and find a way to collaborate on becoming the Robber Barons of the new frontier. The landscape is about to change, and all of your bickering to justify your worth is not going to save your scalps.
I’d rethink your Wednesday session and put it to better use by attempting to collaborate on opportunity rather than justifying your respective positions within your industry. Six years ago, you all would have been arguing over “eye ball stickiness” and billion dollar valuations for start-ups going public with PE ratios that make no sense. Guess what – I sold short and made a killing.
Anyway, if it’s war for Wednesday, I’ll be there with bells on. But if anyone has a better idea, maybe I’ll stoke a check for something more useful than YSP.
Oh yeah, Tommie boy… from what I can see, and I’m no expert (well, yes I am), Xbroker is nothing more than a marketing and PR portal, just like wallst.net is for stock promotion. Does the Kelly Blue Book violate automobile financing regulations by disclosing dealer invoice? Or better yet, maybe they’re fee splitting by taking money from Ford for advertising.
Sharpening my fangs….
eyeroll, now we’re splitting hairs but I will oblidge because I think it important that if you are going to quote him that you do so accurately and in context. The key words in your comment quoting his findings being “my study”.
He begins his statements with this, which you conveniently left out.
“Over the past year, I have been investigating the economic impact of yield spread premiums.(1) A major component of my investigation has been an empirical analysis of a nationwide sample of approximately 3,000 mortgages originated by one group of affiliated lending institutions in the late 1990s”
His disclosure (ironically in the fine print at the bottom of this document, much akin to his disdain for YSP being in the fine print on loan docs) state this;
“As indicated above, the sample upon which my empirical study is based was limited to loans originated by an affiliated group of lending institutions and thus does not include loans from all lending institutions in the industry.”
11/11/2006 by A Day In the Life of a Loan Advisor - Tommie W. Gibson
His disclosure (ironically in the fine print at the bottom of this document, much akin to his disdain for YSP being in the fine print on loan docs) state this;
“As indicated above, the sample upon which my empirical study is based was limited to loans originated by an affiliated group of lending institutions and thus does not include loans from all lending institutions in the industry.”
It was in fine print because you are drawing from a brief, not the original doc, which you may read by opening the link at the bottom of the post.
It’s called a focused sample…as it would be near impossible to draw from every lender in the USA. It is safe to say the numbers would shake out very consistent, no matter how wide they broadened the scope.
11/11/2006 by Jeff Corbett
Jeff Corbet… really quick. Sorry, but the problem that I have with a lot of your blogs and comments is because you seem to mention a lot of STATS. But you don’t show where you get them from until I ask you about them. And then you go on to tell us that the person that made the quote protected themselves by explaining at the bottom, that these are studys. BUT….again, you never mention this in your blogs, that these are studies. And not once, has anyone expressed that these studies can be off 8% to 10%… + or - When I was taught how to debate, if you want to win a debate, you should tell everyone where you are getting your information, unless it is your opinion.
Sorry…but if you go back and read most of your statements… you never mention that these are either studies or your opinions. And it comes across that you are right and that everyone else is wrong. And basically, making yourself look like you are the best source. And then when someone as myself or Brian Brady, or Tommie Gibson make a point or comment, you don’t address it. You skate around the issue.
NOW… I know Rich Jacobson did a blog on A Few Bad Apples. And I know I am coming across very strong in this comment. And I know many you might have issues with the way I am writing this. But I spoken to 5 well respected loan officers on this issue and they are all here on Active Rain. I then went outside and asked 2 others that work for premier companies that aren’t on active rain. I had them read this blog and several others. Every single one of them have felt that we have been slandered. We now a realtor that has commented in this blog that thinks everything that you are talking about is TRUE. You have copied what a realtor said and pasted it on your web site as a Testimonial.
Jeff,
Awesome, where else would you find a better put together blog and the truth.
Thanks for helping us all understand what is going on in the mortgage world.
10/13/2006
by Susan Trombley
My problem now is that people and realtors are taking you wording and blogs as the gospel, thinking that what you are saying is thr truth and nothing but the truth. If you ever read any of my blogs, if I state a fact, I tell you where it comes from. If I don’t give you the source, 9 out of 10 times, I then say….this is my opinion. Even when I give an example of something, at the end, I say this is my opinion…but that it works.
I went to your web site…. this is a quote from your web site. “YOU’VE NEVER BEEN OFFERED THE MORTGAGE RATES
PROGRAMS YOU ACTUALLY QUALIFY FOR. ” Never? Never means never…. How can you state that. It’s false, because I will find you one client that was offered what they qualified for. All I need is one, to disprove this comment.
Here is another quote from your web site: “Think I’m being sensationalistic? Prepare to be pissed off at your long time mortgage ‘friend’. ” You are now trying to clients, that generally this happens to them. Not at anytime do you say… this can happen to you. You talk about lenders misleading the general public. You are leading them to believe that you are right…. and nobody else. This is my opinion, but read that sentence several times. You are telling people that even their mortgage friends basically rip them off. Again, not once do you make a statement that leads people to believe that this can happen..maybe, 25% of the time or 50% of the time. When I read this, it tells me … ALWAYS.
Jeff Corbet…. let me ask you a question. On your profile here, on Active Rain. This is what you state:
Description: An Insiders View to the Deceptive and Predatory Mortgage Industry. Education plus Transparency = Fair Market Practices
But on your web site, http://www.thexbroker.com/, you talk about and offer: X-qualified and mortgage x-ray.
The first service is actually a mini application that says that you will e-mail rates. I have been trying it for a few days now. It doesn’t send me anything. The other one, mortgage x-ray asks some typical question. And on this page, this is what you say.
If you’re in the process of getting a mortgage, you’re probably wondering if the rate you’ve been quoted is the best you can do (it isn’t), if the fees you’re being asked to pay are reasonable (they’re not), and if the broker/banker is hiding anything from you (what do you think?).
My comment to this is right here: You state…. isn’t…. they are not. This implies that everyone that has ever done a mortgage HAS never received a fair deal. NEVER. And this is how you are preaching this on Active Rain, but in a more polite manner. Making others think that you are right. You know what this is doing to the other lenders on this site? You are pitting the realtors and other types of potential clients again us, the LENDERS & loan officers on Active Rain and in general. Me? Jeff Belonger…. I am tired of defending myself and others on here and just in life in general.
You then go on to say this on your web page:
The fact is, I’ve NEVER reviewed a deal where the borrower was: a) quoted the interest rates he/she actually qualified for, and b) knew how much the broker was actually getting paid.
Again…never? NEVER? I beg to differ. I lost money on a client from doing his loan. Not money as in…. I spent so many hours on this deal…even though I made $2,000 on this person, I still lost time and money. No, I am talking about…. I had to pay my company $523 after it closed. Why did I do this? Because the client didn’t have the funds at the last minute. So I saved the deal by taking the hit, in hopes of referrals and some new realtor relationships. So… how can you say NEVER? In regards to the broker getting paid? LOL I sent a client a letter…who was an accountant and I in this letter showed him my total fees and YIELD Spread, even though I was a banker. He knew about the yield spread and I sent him my rate sheet and a letter. WHy am I mad? Because you are putting in peoples minds that everyone outside your web site does this…and that you and only you will save them from this.
And Jeff Corbet. How is this? Are you still a loan officer or run a mortgage company? You must be doing something because you have semi applications on your web site. And in order to get rates from other lenders, you have to be an approved lender with them.
Your web site then goes on to write articles about the mortgage industry. Here is one below. They are all negative, against the mortgage industry and all lenders out. basically all….
This came from your web site. The Mortgage Rip-Off Report
Can you please answer these questions.
1. are you a lender?
2 are you a licensed loan officer? originator?
3. what do you do with the clients information, since you tell them that you can do better. Do you get them the loans? pass it on to someone else?
To everyone reading this. I apologize for not being professional in some of your minds. We all know that many lenders do abuse this. But just about every blog that Mr Corbet writes are his opinions. But he makes you think this the truth and nothing but the truth. That this is the bible and you have to believe it. It has really upset a lot of the lenders here on Active Rain. I have been getting phone calls non stop since this blog was posted. Should I have wrote this? Well….if Active Rain wants to kick me off, I will go into withdrawal. But I am tired of realtors and people in general reading this and thinking this happens ALL the time. And making them think that basically, you should be paying little to nothing when it comes to lenders costs, etc etc.
In Jeff’s last 3 blogs or so, I have asked questions hoping for the answers. But I don’t get direct answers. I get a little of this and a little of that.
Many of the lenders and loan officers on here didn’t know how to voice their opinion. But as you can see by some of the comments on here….it is now getting to some of us. We all played along with his comments. basically to be nice. But it is out of control now. People other than lenders are making comments now saying…. thanks for waking us up to this. But not once has he told you what he actually charges.. or what his rates are. But says he is the lowest. And people just believe him. He is basically trying to start a new model of financing. This has been tried 3 times that I know of in the last 6 years. And all of them have failed. But he goes on to say that this will happen and that so many lenders will jump on to this model. But he still hasn’t shown any of us the model or the rates and fees. He has told one person on here that he was going to do this 2 months ago. Still nothing. Talk about promising something and not delivering. And he mentions these tactics on his web site.
I will leave the rest of this to everyone else. Even to the Active Rain Gods. If this was a true forum that I was writing in, I would be able to say this without worrying about getting booted out. And told to leave. This is my opinion, but it has also been expressed to me by 5 others…. two whom I have talked on the phone. I am asking for the negativity to STOP. And if you are going to state something, state it as YOUR opinion. And when you quote something, show the whole quote and not what you think others want to see.
Read two comments above this. Tommie actually found the quotes and what was said…. Jeff Corbet never mentioned this and skipped it. He just mentioned names. But someone actually went hunting and found something different.
11/11/2006 by Jeff Belonger
And Jeff Corbet, if you could all of my questions….especially the last group of them near the bottom. Please explain who you are. Mainly, are you still a loan officer or your own company? Or do you pass this information onto other companies. Thank you.
11/11/2006 by Jeff Belonger
Jeff Corbett:
Correspondent Lenders do assume credit risk. You can sell to investors on a forward locking basis or bulk sell them to Wall Street secutitizers for better execution. Either channel does not guarantee that they will buy the loans so a correspondent absolutely does assume credit risk.
SRP is term that is completely different from YSP.
I decided to give you an intelligent CORRECT answer instead of “ehhh.yeah”
If you can tell that I’m frustrated it’s because you are the secong mortgage broker (and yes, jeff, you are a mortgage broker) here who is posing as the “good guy” in fron t of the Realtor community by spreading misinformation.
Although, I have to hand it to you, Jeff. Your snake oil is a whole lot more tolerable than some of the other guys; I think you actually believe you’re an innovator rather than just another discount mortgage broker.
11/11/2006 by Brian Brady
Wow! I just read Jeff Belonger’s comment and direct question to you, Jeff Corbett. I must chime in. I, for one, was naively taken by your “innovator” speech some 30 days ago when you promised me “more material tomorrow” …(October 12, 2006) …I’m still waiting.
Jeff Corbett: You’ve stirred up some mighty strong emotions here but you aren’t backing up the talk with the walk. Your credibility is becoming the issue.
11/11/2006 by Brian Brady
Bad press is great press……
I leave my posts and opinion open to what and whoever would like to show me or anyone else, different. I do not skate around issues, I hit them head on.
Express your differences, please…attacking my character and credentials is a feeble and desperate move Jeff…Im highly disappointed….,
I will be happy to, and typically take good care to, quote any of my sources since they are inspiration for all opinion.
My opinion, (by the way, opinion is the basis of every blog post…mine, yours, whoevers), that is contained in of this particular post, is based on a Government Hearing, and the most comprehensive of it’s kind.
I guess it’s up to the community to decide if I, or you, are the fraud…since that is what you are apparently accusing me of.
I’ve never attacked anyone on an individual level, with exception to those who have attacked others first.
The mortgage industry is tainted and needs an enema…called transparency. My opinion, enforced by amendment #1.
If you cant handle the heat get out of the kitchen.
This is getting interesting….Lets have a Blog War! Me against the haters…..
Jeff +5….and ANYONE else…please bring forth the questions I purportedly skate around.
Jeeze, sounds like someones jealous
and I hope you wouldn’t, and definitely should not, get kicked off AR for having an opinion.
11/11/2006 by Jeff Corbett
Wow, now that’s what I call some serious commenting. This stuff is way over my head but I will be back later in anticipation of a response. And just so you guys know, I am fully aware there are two sides to every “truth”. I’m a firm believer in stepping up and defending your position. Damn AR is getting good!!!!!!!
11/11/2006 by Bryant Tutas
Brian…Brokers, bankers, corespondent and otherwise assume risk when they agree to originate a loan. Thats called business. YSP has nothing to do with risk, that was the answer to your previous statement……”They assume credit risk and as such can keep the loan or sell it. THAT is why they don’t disclose YSP.”
Im not a broker. I was for 6 years, owned my own ’shop’ which originated over 2500 loans…. closed in Jan 2006 to do what I do now… You can read the rest on My Profile.
I am the one being bluntly honest, with nothing to hide….if you want to challenge my credibility, prepare to have yours challenged back.
I’m not sure who the other 2 are, outside of JeffB, Bryan Brady, and Tommie Gibson, but please all come forth, postulate your questions, throw your personal darts, and I will knock them down one by one. Are any of you guys UMB’s? Do you not disclose YSP? If you are not pulling any of the shenanigans I write of, then what in the world are you all worried about?
If I promised you some reply on Oct 13th Brian, and did not deliver…I aplogize, it’s hard to keep up with every comment, on every blog and community I comment on/in. I will look back and address what I promised accordingly.
It’s Saturday eve…I will more than address all the pock shots tomorrow, on the largest stage AR will allow for…
It’s officially a Blog war…!!!
11/11/2006 by Jeff Corbett
Oooo…Battle…Time For My Cammies And Guns…Damn AR is getting good!!!!! I to will anticipate the prgress of this post…
11/11/2006 by “The Lovely Wife”…Broker Bryant’s…Wife!
Well folks you’ve attracted my attention. No doubt that I am about to “chime in.” In fact, I am printing 27 legal pages for this post and comments so that I can get this in perspective. Jeff, I will take exception to much of what you have said.
11/11/2006 by Ron Withers
One last thing….one more time…
I have never attacked anyone of you personally. If you take anything I write personally, thats your conscious, and your problem.
I look forward to this debate.
“posing as the “good guy” in front of the Realtor community by spreading misinformation.”
What misinformation?
11/11/2006 by Jeff Corbett
Ron…You will take exception…? Plz explain?
11/11/2006 by Jeff Corbett
Jeff,
I will explain in my post after I have had the time to collect all my thoughts and make my notes so that I can “accurately” and intelligenty respond. You have struck a nerve, and you have done so before. I was previously encourgaged to strike up a courteous debate by another ActiveRainer but did not. And now a second request to chime in.
So I will.
This may take me a day or two as my business comes first and have to make the time for this.
11/11/2006 by Ron Withers
Hmm I guess I’ll start here
Illegal - Distributing proprietary information (wholesale rate sheets)
Illegal - Taking mortgage applications while not licensed to do so
Illegal - Representing yourself as a mortgage broker
Illegal - Giving recommendations on loan products while not licensed to do so
11/11/2006 by A Day In the Life of a Loan Advisor - Tommie W. Gibson
Jeff,
Let me take a moment to clarify “Take Exeception.” Probably a preliminary choice of bad words. It’s not as much take exception to your subject matter as take exception to your opinion or slant on the way you present it. There is “No War” other than the one you have instigated.
11/11/2006 by Ron Withers
Hmm… I guess I’ll start here
Illegal - Distributing proprietary information (wholesale rate sheets)
Currently, I do not… I did when I ran my brokerage. The AE knew it as did the UW’s and they and no probs at all with it.
Illegal - Taking mortgage applications while not licensed to do so
Show me a mortgage application I have taken?
Illegal - Representing yourself as a mortgage broker
Nope wrong again…show me where I say Im a current mortgage broker….
Illegal - Giving recommendations on loan products while not licensed to do so
And…0-4…Again, where are my direct reccomendations?
Any reccomendations, loan applications, or distribution of mortgage rate sheets et al. are done by licensed affiliates…Period.
Ron, whenever you’re ready….
Why don’t we set the hoe-down for Wed…so everyone may ‘tune-up’
Be careful with your unfounded accusations regarding me personally, you guys are walking down the wrong road. As I’ve said before…Ive heard and been threatened worse, by alot better.
11/11/2006 by Jeff Corbett
Jeff Corbet… I should be in bed by now. One thing until awake tomorrow. You do skate and skate well. You still haven’t answered any of my questions that I wrote to you. Notta. And personal? You are the one taking this personal. You have mentioned war…. that is personal. I am talking about facts and opinions. Everything you state is mentioned as a fact or left opened to be assumed as a fact. If you go back to many of you blogs, this is about the first time now in a discussion that you have mentioned “opinion”.
2nd… this was one of your comments. “Express your differences, please…attacking my character and credentials is a feeble and desperate move Jeff…Im highly disappointed….,”
Highly disappointed? Please. I actually don’t care. I care about how you are making the lending institution look like we are all crooks and you are the only one that is the good guy. I copied 2 to 3 quotes from your web site. You did not mention or defend one of them. Again, you are proving my points right. “that you are skating around several issues.” Stand up and answer my questions. Just like Brian Brady’s, you still haven’t. And trying to make me look bad again…. LOL In all honesty, this is PATHETIC. This is not a debate. Any college professor would look at this and cry.
the kitchen and heat crap that you quoted. I can withstand any heat. It’s those that aren’t even in the kitchen with me, that give blind comments from a distance. Why don’t you come into the kitchen with me and then see who can stand the heat. There is an old saying. ” stop talking out your _____” Your web site is one sided…..
I need sleep, because this is ruinning minds in the real estate community. Again, this is not a debate. Look up debate. Debate \De*bate”\, v. t. 1. To engage in combat for; to strive for.
2. To contend for in words or arguments; to strive to maintain by reasoning; to dispute; to contest; to discuss; to argue for and against. [1913 Webster]
Debate \De*bate”\, n.
2. Contention in words or arguments; discussion for the purpose of elucidating truth or influencing action; strife in argument; controversy; as, the debates in Parliament or in Congress. [1913 Webster]
As my closing for now…. this is part of how a debate works. Proof….from a source and showing it. That was from Wesbter. Tommie Gibson called you out on an opinion that you had. And then you said it came from “The ‘fear mongers’ ..who are two Harvard Professors and the US Congress (amongst many other local legislative appellates). YSP may be used as a business tool, but it’s purpose has been clearly defined, again, not by me.” But you mentioned a name… and that was it. Tommie actually quoted their words…. you didn’t. And he proved his point, you didn’t. Again, a one sided debate. We have shown facts, you only mention them and throw out names and half sources….and that’s it. In an debate, you would have lost. Why? Because I called you out and asked for your references…. Once you can’t prove these, you lose. Bottom line. Even if you are right. That is called a DEBATE.
11/12/2006 by Jeff Belonger
Jeff Corbett:
I think I better understand your position now. You are an unlicensed (by state or national regulators ) PR firm?
11/12/2006 by Brian Brady
eff…. as Brian has stated. What is your middle initial? At least answer my questions. Why won’t you. ???
11/12/2006 by Jeff Belonger
Jeff Corbett- First off who on here has “threatened you” that’s a pretty bold accusation, I’d really like to see you provide us with some sort of evidence that someone on here has threatened you. I’ll be the first to condemn them.
Back to the Wholesale ratesheets you replied-
Currently, I do not… I did when I ran my brokerage. The AE knew it as did the UW’s and they and no probs at all with it.
Oh okay so this is not something you practice??? This is just something you used to do, you’re not doing anymore, but you spend the majority of your time “exposing” true mortgage professionals (people really in the business) for not doing it? So now you’re stepping away from the disclosure of par rates from wholesale lenders? Isn’t that the whole basis of your “revolution”, isn’t that plastered all over your website and blogs?
If you are now saying that you don’t provide clients with wholesale rate sheets showing par rates from lenders, I’ll take you at your word. But since you are now saying that you “did”, I still contend it is/was illegal. I’ve asked a couple times now, I’ll give you another shot. Name a couple of Lenders that allow for distribution of their wholesale ratesheets???? Even if it was back in the days when you were actually in the business.
Adam Stuart- First off, let me be the first to welcome you to Activerain, hopefully you’ll take the time to venture out beyond this particular thread while you are here, in doing so I think you will find that your suggestion to collaborate on opportunity is a common them and pretty much the mission of Active Rain.
In regards to this thread, and your comments herein, you made several excellent points many of which I agree with. I had to read it a couple times to wade through the rhetoric, name calling, sensationalism and superlatives, but I think I get your point.
You refer to this thread as a pissing contest between market insiders. The reason I even began posting on this thread, is because I am of the opinion that Mr. Corbett is not a “market insider”. He has continually professed and represented himself to be one, but I think it is now obvious on this thread he is not. I wanted to make sure that the realtors and others that read his work realize that although he quotes his fee structures, is listed on Active Rain as a “mortgage company”, advertises his pre-qual engine on his website, and offers up his services of assisting people in obtaining a mortgage, he can’t, and he isn’t. I think you hit the nail on the head when you described him a;
“Xbroker is nothing more than a marketing and PR portal”.
For someone so hell bent on “transparency”, his approach, is anything but.
You stated “Why do you think your CPA (Cost per Acquisition), regardless of your marketing medium, has gone from $450 a lead two years ago to over $1,500 today - because you created a perception that forces 8 out 10 prospects to shop you.”
You ask why I think CPA has increased so much over the last few years. Well I think a lot of it has to do with people outside the business that don’t actually do loans, spending a lot of time energy and money in order to con people into believe they can do what has never been done. Basically lead aggregators. The Jeff Corbetts, of the world the Lendingtree’s, the lowermybills, and all the other companies that don’t write loans but want to rewrite the entire business model under the guise of “more competition”, “eliminating the middleman”, etc.. Are only attempting to replace the middlemen (the actual mortgage professionals) with themselves. Won’t work, didn’t work in the stock market like you mentioned, won’t work in this market. Their actions are actually just adding another middle man, raising the cost of doing business, and thereby raising the price of mortgages. I didn’t “create this perception”, I am here to combat it.
In your assertion “what you are all afraid of is more than a correction, but a collision - one of technology and marketing that puts the power in the hands of the consumer.” Actually, no not at all.
I think your comments in regards to realtor commissions is accurate, with the exception of deeming my work as “grift” and realtors as “lazy”. There is definitely a difference in the position of mortgage professionals their fee structures and that of realtors. I don’t think the point you made has anything to do with the premise on which the topic was raised, but accurate, none the less.
In regards to your analogy between wholesale lender rates and Kelly blue book, it doesn’t really hold any water. I don’t fault you for it. It just stems from your ignorance of the mortgage industry, or the auto industry, or maybe even both. The “invoice” price in the Kelly Bluebook does not contain discounts, rebates, or incentives that dealers receive for the cars they sell. On the other hand, mortgage par rates taken from proprietary wholesale rate sheets offer up no such profits.
11/12/2006 by A Day In the Life of a Loan Advisor - Tommie W. Gibson
Actually, I don’t see his model as a “discount brokerage” at all. From what I can tell, he’s the just stirring the pot of perceived repression and fear for the sheeple consumer – the very ones that are about to be in foreclosure after being hocked neg ams that didn’t beat the appreciation curve. (I know, you all heavily counseled your clients about the downside).
The legitimacy of his overall methodology is clearly only important to you folks. Right or wrong in it’s entirety, spin wins! His message is creating press, provocation of thought, and although you might prefer to continue to voice blast at 11pm “mortgage rates are at an all time low,” press #1 now, I think a taste of demagoguery for the masses is aptly just.
My guess, if everyone on this blog were an Xbranch being given “free” leads that didn’t cost you $1500 in CPA (you all earned that), the tone would be quite different.
Let’s get down to the nitty-gritty…this is about marketing! The dissemination of information to the masses (misdirected or otherwise), is the cornerstone of influence. If he wants scare the world in to believing that “all” brokers are dirty thieves, and that brings about an awareness of the industry – great! Let’s reverse the situation and take Ditech. They have sold the consumer (through marketing), on a flat fee loan (not true) – lying all the way to “their” bank. I’ll bet each and every one you brokers bash them during your value pitch, hoping to not lose another “bone” to Ditech.
It’s the game – but unfortunately from what I can tell, most of you haven’t realized yet that you are just pawns - “the collective whole” of resounding echoes that blog your way to mediocrity while the innovators (in drag or not), are stealing your business. (I know, xbroker is not an innovator – we’ve covered that).
Bottom line, I’m not in “your” business, I’m in “the” business, and in the world I live in as Gordon Gecko so succinctly put it…
“The new law of evolution in corporate America seems to be survival of the unfittest. Well, in my book you either do it right or you get eliminated.”
Adam Stuart
11/12/2006 by Adam Stuart
Jeff Corbett,
I will challenge you to provide answers to the various questions posed to you and then ask that you answer a few of my questions. I could pose a few more about about your personal agenda but I believe that I already know the answers.
Why is it that you claim that there is an “Internal Civil War in the Mortgage Industry? What is your basis for selecting the title of your post? Is this your opinion, an assumption or a fact. Please point us to your source!
You state that an “Overwhelming majority of borrowers do not need YSP’s to pay up-front settlement costs but are never offered otherwise. Again is this your opinion or a fact? Please reference your source.
As the “XBroker”, I don’t know what markets that you are licensed in, what markets that you target but I will suggest that it must be different than mine. The bulk of the borrowers are low to moderate income, first-time buyers who need 100% financing and seller contribution to boot. If they are somewhat fortunate if they can swing 95-97% financing and still many need seller concessions. Your ugly 3 little letter acronym (YSP) does support their needs no matter what you may say!
I have to go conduct business, more later!
One parting thought tho below is your posted fixed fee schedule:
XBROKER FIXED FEE SCHEDULE:
* $3,000…..Full-Documentation / Sub-Prime
* $2,750…..Stated Income, Verified Assets
* $2,500…..Stated Income, Stated Assets
* $2,500…..No-Documentation
Geesh, you earn more than I do. Maybe I should go to work for you……oops, not really!
11/12/2006 by Ron Withers
Adam Stuart-
“if everyone on this blog were an Xbranch being given “free” leads that didn’t cost you $1500 in CPA (you all earned that), the tone would be quite different.”
If my aunt had a package she’d be my uncle…. The problem on this thread that we’re trying to get to the bottom of, is nobody knows what an “xbranch” is. The fact that whatever it is, it gives out free leads is news to me. My CPA is well below $1500.
My apologies for correcting you on the Kelly Blue Book analogy, I was convinced you were defending the distribution of wholesale rates and using their distribution of “invoice” prices as an example. I now know you were referring to the birthing of rare panda bears in China. Thanks for the clarification.
11/12/2006 by A Day In the Life of a Loan Advisor - Tommie W. Gibson
Alrighty then! Seems like this is shaking up to be better than the Russell Shaw / Candybags event!
11/12/2006 by Tony Marriott, Associate Broker, CRB, CRS
“The Lovely Wife Here”
Man, I am learning a lot here…I have been watching this post for the last day…WOW. I see that some are taking the word WAR in the literal sense. In the world of Blogging “WAR” means a controversial post. This is one of those and MAN…I am learning a lot here…Pardon the interruption Gentlemen, by all means please continue. Bearing in mind this is a public post. Not to mention you have a Lady present. Thank you.
TLW “The Lovely Wife”…Learning A Lot Here…ROAR!
11/12/2006 by “The Lovely Wife”…Broker Bryant’s…Wife!
Ooops.. sorry I didnt acknowledge your parting question.
“Capitalism, although we’d like to believe is the common thread of our entrepreneurial spirit, is nothing more than an oligopoly of market makers and regulators. Which one are you?”
I disagree that capitalism is nothing more than an oligopoly (a healthy one anyway) I disagree in your implication that your question warrants an “either or” response. I am neither one nor the other, but both. For the sake of thread drift, I’ll leave at that, but I encourage you to pose this question on a blog of your own now that you’re a member here on active rain. I’d definately read it.
11/12/2006 by A Day In the Life of a Loan Advisor - Tommie W. Gibson
zz z z Z z z z Z z z z …. I will come back to this tomorrow. Everyone knows where I stand/. ANSWER my questions if you want to be credible. You know the answer to that one. I hope you do.
Hey Adam…some great terminology….. so…. I am just trying to clarify. What do you actually do? And why not sign up on Active rain.?
Overall…. Ron brings out what I was trying to get at. Jeff Corbet has a scale, a pay scale. If you can answer my one major question. Do you still write/originate loans? Or is your web site that has a application…similiar to a 1003…. when it gets filled out, where does it go? Do you sell this to another lender? Besides…. like I said… I have been trying that so called application…. not 4 days in a row…and twice, about 2 weeks ago… it hasn’t worked. And you haven’t acknolwdged this. Why not? Is it a ploy?
Anyhow….I am done for the day. Beating this brick wall is making my knuckles bleed…. lol Read my blog later tonight…. come in and answer my questions…. but why would you, you can’t even do that here. And you were given a chance and failed to do that. Because of that, you have lost all respect from me. I bet your comment would be, I don’t care. Well, you should, because my voice on here is now stronger. I don’t mislead. You sir, have. And I am being polite with that comment.
11/12/2006 by Jeff Belonger
Wow….Nice!
Just logged back in,…and we have a new participant…Ill need a minute to catch back up and reply to this hodge podge…
Jeff, Tommie, Brian, and Ron….anyone else?
11/12/2006 by Jeff Corbett
Im gonna take my answers to your questions and outcrying to a new post….
All of This is Way to good to be lost in a comment thread…
11/12/2006 by Jeff Corbett
Ok I have a couple of questions related to YSP. I just want to make sure I am on the same page since this is all new to me. I’m not forming an opinion yet, just want to make sure I am on the same page with what YSP is.
1. Is paying YSP a consumer choice or is it just automatic?
2. Is YSP on the HUD1 as a POC item?
3. Let’s say I agree to pay my broker $5,000 to do the loan. can this be split with say $2,000 as a closing costs and the balance reflected in YSP? And if so, how much would $3,000 YSP affect my rate? Is there a ratio? Or are they just like points where 1 point equals 1/8 percent(I think)?
4. Is there ever a time, that as a consumer, I would not be aware of YSP and it would just be paid out without my knowledge? Does it always affect my rate?
5. Do brokers prefer getting paid through YSP or direct closing costs? Or does it matter?
6. Do Lenders pay brokers in any other way?
7. Would YSP show up on a GFE?
Ok that’s it for now.
11/12/2006 by Bryant Tutas
1. Is paying YSP a consumer choice or is it just automatic? It’s a consumer choice. One of many tools they have to differ costs of a loan. Key word being that they understand there are costs associated with getting a loan
2. Is YSP on the HUD1 as a POC item? Yes shown as lender credit paid out of close.
3. Let’s say I agree to pay my broker $5,000 to do the loan. can this be split with say $2,000 as a closing costs and the balance reflected in YSP? And if so, how much would $3,000 YSP affect my rate? Is there a ratio? Or are they just like points where 1 point equals 1/8 percent(I think)? Yes it’s all part of negotiating the loan. There is no direct answer in what it would do to the rate. The reason is because there are different yeild spreads on every product. The lender uses thier yield spreads to diversify their risk of their loan portfolio (one of many reasons). For instance they may feel like their portfolio needs more A, Full doc. low risk loans. One way they can accomplish that is to pay higher yeild spreads at a lower ysp to interest percentage point ratio, enticing brokers to pitch thier loan product over that of a competitor. (I hope that makes sense, it’s hard to explain)
4. Is there ever a time, that as a consumer, I would not be aware of YSP and it would just be paid out without my knowledge? Does it always affect my rate? It will always affect your rate, It can be done without verbal knowledge, but you will sign closing docs. reflecting it’s existance 100% of the time.
5. Do brokers prefer getting paid through YSP or direct closing costs? Or does it matter? Does not matter.
6. Do Lenders pay brokers in any other way? Not that I am aware of.
7. Would YSP show up on a GFE? It should, however manytimes the GFE is given out prior to having all the information needed to close the loan. In which case it will show up as a range (ex. 0-5). Caylx is the most common loan software in the market used by brokers. There are default settings available in Caylx for the protection of brokers. Most brokers will set that default setting at it’s highest level (0-5% here in TX) in order to protect them while getting the actual loan together. The actual dollar figure is on the HUD.
11/12/2006 by A Day In the Life of a Loan Advisor - Tommie W. Gibson
Tommie….. sorry, but # 2 is incorrect. The YSP is NEVER disclosed on the HUD if I am a BANKER and even signed up as a correspondent lender.
so….#4 is wrong also…. it’s not 100% of the time. Again, refer to my number 2 answer.
I am not going to answer the other questions until tonight or tomorrow….. those questions and answers are more of OPINION. But I had to give the correct answers for the other 2 questions…… sorry, but those are the facts. And again…. you have to remember state laws also. But as a BANKER. They do not show YSP at anytime.
11/12/2006 by Jeff Belonger
True that Jeff, Broker Bryant referred to “broker” in his questions, I was giving him the “brokers” version. Bankers and Retail Lenders are a different story.
11/12/2006 by A Day In the Life of a Loan Advisor - Tommie W. Gibson
Ok, that helps. Is a Banker a direct lender? Meaning there is no shopping rates or anything else. I guess my question is how do I know if I am using a Banker, broker or correspondent lender? Are there other entities that I have missed?
Sorry for the real basic questions but I don’t do loans and I don’t work with buyers so really I am very ignorant when it comes to loans.
11/12/2006 by Bryant Tutas
Im writing a new post which will address this as well Bryant. But would like to quick answer your Q’s:
1) A CONSUMERS CHOICE…PERIOD!!!!
2) Bankers dont have to (does this make it OK, I say no). But it should disclosed POC…to see a bankers comparison…see my Disturbing Truth Post.
3) Yes, Depends on loan size and type, Yes, and Yes.
4) Yes, YES.
5) Doesn’t matter…$$ is $$.
6) The Lender is not paying the broker…this would be construed as a kickback and thus illegal under HUD’s rules regarding kickbacks…they are rebating the CONSUMER..this is the most misunderstood aspect of YSP’s…They belong to the borrower NOT the Broker!!!
7) YSP SHOULD BE DISCLOSED AND REDISCLOSED on a GFE up to 72 hrs prior to close.
11/12/2006 by Jeff Corbett
Jeff Corbet….. spend time on that new blog. I am still waiting on my initial questions that I asked twice…..the first time over 12 hours ago, but you have made 4 other comments since that time…still ignoring my questions. WHY? In my opinion, don’t worry about your OPINIONS to the new questions. Or are you trying to tell me something? I hate assuming, but sometimes I have no choice but to assume because of someone else’s actions.
Last… Bryant…… like I said, I will answer those questions tonight. Jeff Corbet can’t answer them any other way, because it would go against his statements on his web site. And that is the bottom line. He is one sided….. and only one side. I on the other hand will point out the good and bad on all questions. And it’s not just OPINION. Something that he is failing to realize until he answers my questions.
11/12/2006 by Jeff Belonger
Jeff…My last name is spelled Corbett
I will answer all your questions…I am not dodging, ducking, nor on your immediate time schedule. I will do so in an articulate, straight forward way, with subsequent questions for you and any other broker who would like to chime in.
Im trying to tell you to back off, your goading isn’t going to inspire me to oblige you any quicker than I am currently doing. All in good time….pipe down.
11/12/2006 by Jeff Corbett
LOL whatever…. you will say what you want to anyhow. The good thing is that we have made others aware of how you percieve the industry and lenders in general. And I won’t elaborate on that until you answer my questions., Again, thanks for proving my point. I am not goading you …..I am not pushing you. I am just tired of people as yourself that get a chance to make their point, but all you have done is rattle off your own opinions again. And still have answered my questions, until I actually beg you. You didn’t mention this 6 comments again. Not until I pushed the button.
Maybe, just maybe we will see some answers in a week. Hey, just my opinion. But it’s the only thing that I have to go off of because of what you have shown me. That’s all……
I feel bad for people here on active rain, because this has been a one sided joke. And that I am now dropping down to your level…. it was the only way to get your attention. Yes…. because I didn’t have it before and you showed me this.
Even your lame answer to Brian Brady who has been waiting for your answer for 2 months. And it wasn’t a general question that he asked. It was something in regards to your so called mortgage x model. What you want to do for the industry. And he has asked you more than once. But you give an answer….so, I was busy….. it got away from me? lol Well, you are on here every other day. Can’t be too busy. And you know damn well that it was a big and important question… and again, you skated around the issue. Transparency that you preach? Yourself. Meaning, I can see right through you. And others have caught on. This is not my opinion, but the facts.
11/12/2006 by Jeff Belonger
oh yea…. sorry Jeff Corbett. I am human by the way. But glad that you could at least pick up on one mistake.
11/12/2006 by Jeff Belonger
I am hoping the stage is as large as possible…for which I appreciate your recruiting efforts.
It will be out no later than this evening…go grab another beer.
11/12/2006 by Jeff Corbett
Regarding 6) in Broker Bryants question regarding payment by lenders. I think this was/is the key difference in philosophy regarding this Thread to begin with. I’ll give you the information for you to make that decision.
I am of the belief that the YSP is payment by the lender to the broker. I think the debate over which is just semantics. I don’t agree with Jeff that it is illegal under HUD’s rules and considered a kickback. As with all law and court decisions there’s room for debate and opinion as to the interpretation of the law. There are two opinions that guide these opposing views. On one side you have Prof. Howell E. Jackson believes they are kickbacks and illegal and on the other side The U.S. banking committee on Banking Housing and Urban Affairs (One of the one’s that actually write the laws that regulate my profession and coincedentally the ones with which I will agree). Both consider YSP a payment for goods and services for duties preformed on behalf of the client. Jackson (and Jeff Corbett) is of the opinion that by paying these monies directly to the broker (as it is now and has always been) it encourages deception, and classifies it as a kickback and contradicts Section 8 of the HUD. The law makers have deemed it as a payment for services rendered by the broker and for the borrower but none the less goes to the broker. They have ruled that it is not considered a “kickback” So yes that is the only way I know of that a lender pays a broker, although he does it on behalf of the borrower, it winds up the the brokers pocket regardless on who you want to agree with.
Here is a link to Mr. Jacksons stance on this issues and his pleadings before the Chairman and committee. It’s a bit wordy but definately informative on both sides of the debate. He was attempting to change the laws regarding YSP. It was a failed attempt. This is nothing new, it was almost 5 years ago, and it’s still business as usual.
http://banking.senate.gov/02_01hrg/010802/jackson.htm
11/12/2006 by A Day In the Life of a Loan Advisor - Tommie W. Gibson
X…Are you going to let us know on this thread when the new post goes up?…TLW…ROAR!
11/12/2006 by “The Lovely Wife”…Broker Bryant’s…Wife!
LOL… I haven’t had a beer since Friday night. Keep talking, you are just proving my points. In all honesty, I am not worried about you anymore, here on Active. You will only be able to survive because of your one-sided web site. You leave no room for discussion on your web site. TALK about MISLEADING clients. Every topic on your site talks in negative tones against lenders. But you have a semi loan application on your web site. Your so called model has been tried 3 different times. It never materialized and the only way that you can get this so-called model off the ground is by slandering the mortgage industry that you even work in. Not as a lender, but as someone supplying leads to other lenders. YOU are then a middle man…. it costs lenders to get leads, no matter who they are from. So…answer my questions and stop coming back on here.
You are just prolonging it…….as you have done wit both myself and Brian Brady. Because you were too busy beating up on lenders and not answering a major question and issue that Brian Brady asked…and not just once. But again, you skip right over that after I mention it again. WHY? ??????
11/12/2006 by Jeff Belonger
Thanks Tommie, This is starting to make a little sense. Now putting semantics aside, Should I, as the consumer, always have the option of paying my loan’s costs up front or financing my lending costs by using the YSP?
11/12/2006 by Bryant Tutas
Tommie… thanks for bringing facts to the table and to this so-called discussion. I am just too tired to keep bring facts to this table of discussion. But I am ready for his answers…….. just waiting with my glass of water… Water that I have been drinking all day. You show a lot of class in your chosen words Mr. Corbett. My tone of lately? Just playing along with your tone and your so-called web site.
And Jeff Corbett…… see, you mentioned Mr Jackson, but you never mentioned what was behind his voice. You just made it sound like what he has done is GOLD….. is the word and right. Just like what’s in the bible. But see, what we have done is go do research and found that all you were doing is using a name that was of opinion……not the truth or hard facts. Again, OPINION. But siad these were facts.
Fact \Fact\ (f[a^]kt), n. Reality; actuality; truth.
fact n 1: a piece of information about circumstances that exist or events that have occurred.
Opinion \O*pin”ion\, n. 1. That which is opined; a notion or conviction founded on probable evidence; belief stronger than impression, less strong than positive knowledge; settled judgment in regard to any point of knowledge or action. [1913 Webster] (Law.) The formal decision, or expression of views
opinion n 1: a personal belief or judgment that is not founded on proof or certainty; “my opinion differs from yours”.
stats \stats\ (st[a^]ts), n. Shortened form of {statistics}[2] (b) . [Slang] [PJC]
Statistics \Sta*tis”tics\ (st[.a]*t[i^]s”t[i^]ks), n. [Cf. F. statistique, G. statistik. See {State}, n.] 1. The science which has to do with the collection, classification, and analysis of facts of a numerical nature regarding any topic.
Just some food for thought. So we all can be on the same page. In regards to answering my questions.
11/12/2006 by Jeff Belonger
Tommie, your post is off, again…Please read the entire testimony. Much of it cites black letter RESPA law, it is not a matter of opinion if YSP’s are the brokers or bankers, they are the Borrowers, that is the law…I will have the actual statutes in my pending Post…
They were not trying to change the law!! He (they) were hired to INTERPRET IT against current mortgage broker practices for the US Congress…
Im not skipping over anything Jeff…Lets let the AR community decide for themselves…
TLW…I will notify everyone in m