Comments on: Mortgage Yield Spread Premiums and The Transparency Thing http://thexbroker.com/2008/04/15/mortgage-yield-spread-premiums-and-the-transparency-thing/ Radical Transparency for The Real Estate and Mortgage Industrys Mon, 13 Oct 2008 20:05:46 +0000 http://wordpress.org/?v=2.6.1 By: Marc Brinitzer http://thexbroker.com/2008/04/15/mortgage-yield-spread-premiums-and-the-transparency-thing/#comment-2466 Marc Brinitzer Sat, 19 Apr 2008 16:07:54 +0000 http://thexbroker.com/2008/04/15/mortgage-yield-spread-premiums-and-the-transparency-thing/#comment-2466 "Some of the banks we work with have created policies with forms that we must have signed to submit with very clear language that the YSP is for closing costs only" Bryant, I'm also beginning to see those YSP disclosure changes by the banks at the wholesale broker level. So far, that seems an extension of the banking effort to marginalize brokers. On a retail level, the banks are still not disclosing YSP or SRP. The banks cling to the argument that unless they sell that loan no YSP is generated. If they ultimately do, they don't know how much it will be. But the bank loan officer still gets paid commission based on the rate delivered to the consumer. The banking argument for non-disclosure implodes at that point. The LO should disclose fees earned as a result of the rate, even if the bank doesn't. So the trend I see developing is that until the banks wash their own dirty laundry, lenders will simply be driven to a banking or correspondent platform. Transparency and disclosure become casualties, and the consumer gets screwed because nobody discloses. Jeff, I like your idea very much. However, I worry that without a level playing field, transparency faces an uphill battle. We may seek to differentiate ourselves by emphasizing knowledge, service, transparency, and experience, but the banking industry's advertising machine has a huge reach. “Some of the banks we work with have created policies with forms that we must have signed to submit with very clear language that the YSP is for closing costs only”

Bryant, I’m also beginning to see those YSP disclosure changes by the banks at the wholesale broker level. So far, that seems an extension of the banking effort to marginalize brokers. On a retail level, the banks are still not disclosing YSP or SRP. The banks cling to the argument that unless they sell that loan no YSP is generated. If they ultimately do, they don’t know how much it will be. But the bank loan officer still gets paid commission based on the rate delivered to the consumer. The banking argument for non-disclosure implodes at that point. The LO should disclose fees earned as a result of the rate, even if the bank doesn’t.

So the trend I see developing is that until the banks wash their own dirty laundry, lenders will simply be driven to a banking or correspondent platform. Transparency and disclosure become casualties, and the consumer gets screwed because nobody discloses.

Jeff, I like your idea very much. However, I worry that without a level playing field, transparency faces an uphill battle. We may seek to differentiate ourselves by emphasizing knowledge, service, transparency, and experience, but the banking industry’s advertising machine has a huge reach.

]]> By: Bryant Keefe http://thexbroker.com/2008/04/15/mortgage-yield-spread-premiums-and-the-transparency-thing/#comment-2434 Bryant Keefe Thu, 17 Apr 2008 14:19:29 +0000 http://thexbroker.com/2008/04/15/mortgage-yield-spread-premiums-and-the-transparency-thing/#comment-2434 YSP will not go away but the ability of the loan officer to put it in their pocket may be. Some of the banks we work with have created policies with forms that we must have signed to submit with very clear language that the YSP is for closing costs only (and or that rate would be lower without the YSP). So if YSP does exist it needs to be a credit to the consumer not paid to the broker as additional profit. The solution is going to the banking model which many of my friends shops are in the process of doing not for the consumer but for the LO's and brokers ability to make profit. Nothing wrong with profit but this does nothing to make lending clearer for the customer. On the note of service and being willing to stand by your pricing. I still think of this as a sales business and I like the reward of closing sales and earning commissions. Sure I do a nice job but I am not a waiter I am a salesman. A consultant would have a fixed fee for services or charge by the hour. We, as an industry, talk about service and all our great value but we still get paid commissions for sales. If you are a consultant or an adviser then price like one. Set an hourly rate or a flat fee per transaction and take points or compensation based on loan size off the table. Let's be real getting paid $5,000 to take an application and have your processor run DU/LP and then see the file to funding while you go look for more clients is not a fair price as a consultant especially in this Agency/FHA automated market. As a salesman earning commission then Yeah Baby! YSP will not go away but the ability of the loan officer to put it in their pocket may be. Some of the banks we work with have created policies with forms that we must have signed to submit with very clear language that the YSP is for closing costs only (and or that rate would be lower without the YSP). So if YSP does exist it needs to be a credit to the consumer not paid to the broker as additional profit. The solution is going to the banking model which many of my friends shops are in the process of doing not for the consumer but for the LO’s and brokers ability to make profit. Nothing wrong with profit but this does nothing to make lending clearer for the customer.

On the note of service and being willing to stand by your pricing. I still think of this as a sales business and I like the reward of closing sales and earning commissions. Sure I do a nice job but I am not a waiter I am a salesman. A consultant would have a fixed fee for services or charge by the hour. We, as an industry, talk about service and all our great value but we still get paid commissions for sales. If you are a consultant or an adviser then price like one. Set an hourly rate or a flat fee per transaction and take points or compensation based on loan size off the table. Let’s be real getting paid $5,000 to take an application and have your processor run DU/LP and then see the file to funding while you go look for more clients is not a fair price as a consultant especially in this Agency/FHA automated market. As a salesman earning commission then Yeah Baby!

]]> By: Tomas Zubicek http://thexbroker.com/2008/04/15/mortgage-yield-spread-premiums-and-the-transparency-thing/#comment-2428 Tomas Zubicek Thu, 17 Apr 2008 04:13:35 +0000 http://thexbroker.com/2008/04/15/mortgage-yield-spread-premiums-and-the-transparency-thing/#comment-2428 Very well put Jeff, I can see your point and I must say,I agree with you, it does not make me happy much, I like to debate the Great minds, but on this topic, there is no much for me to debate. Providing mortgages, or mortgage service, is a business of Servicing the customer, the point of doing a business is to make a profit and if you are good, you should get paid good. When you know, you are providing a valuable service, then you should not be ashamed to disclose your true price. If you have something to hide, then you do stuff unethically and you have no business to continue to do so. There you have it... Very well put Jeff, I can see your point and I must say,I agree with you, it does not make me happy much, I like to debate the Great minds, but on this topic, there is no much for me to debate. Providing mortgages, or mortgage service, is a business of Servicing the customer, the point of doing a business is to make a profit and if you are good, you should get paid good. When you know, you are providing a valuable service, then you should not be ashamed to disclose your true price. If you have something to hide, then you do stuff unethically and you have no business to continue to do so.
There you have it…

]]> By: JeffX http://thexbroker.com/2008/04/15/mortgage-yield-spread-premiums-and-the-transparency-thing/#comment-2426 JeffX Thu, 17 Apr 2008 02:04:44 +0000 http://thexbroker.com/2008/04/15/mortgage-yield-spread-premiums-and-the-transparency-thing/#comment-2426 "Bottom line, I don’t see YSP going away anytime soon…or ever!" ""Its worth mentioning that I’m not here to lobby for the elimination of YSP’s…eliminating Yield Spread Premiums would be a catastrophic mistake, they are a vital tool for many consumers in the market for a mortgage."" For what it's worth, RateSpeed isn't meant to diminish a (good) broker/bankers value, quite the opposite, its meant to augment and focus on their value... If an unethical broker/banker ran the RS application on their website, it would speed their departure from the marketplace or convert them from being one of the unwashed real quick... “Bottom line, I don’t see YSP going away anytime soon…or ever!”

“”Its worth mentioning that I’m not here to lobby for the elimination of YSP’s…eliminating Yield Spread Premiums would be a catastrophic mistake, they are a vital tool for many consumers in the market for a mortgage.”"

For what it’s worth, RateSpeed isn’t meant to diminish a (good) broker/bankers value, quite the opposite, its meant to augment and focus on their value…

If an unethical broker/banker ran the RS application on their website, it would speed their departure from the marketplace or convert them from being one of the unwashed real quick…

]]> By: Joshua Bucio http://thexbroker.com/2008/04/15/mortgage-yield-spread-premiums-and-the-transparency-thing/#comment-2425 Joshua Bucio Thu, 17 Apr 2008 01:56:42 +0000 http://thexbroker.com/2008/04/15/mortgage-yield-spread-premiums-and-the-transparency-thing/#comment-2425 Bottom line, I don't see YSP going away anytime soon...or ever! You may have a fairly good idea with your RateSpeed vision, but there is too much value and service that many brokers give to borrowers. Regardless of the service or product you are selling, people will buy, if you can provide them with what they are looking for. Price isn't a top concern when the "want/need" is met. Sure, there are some unethical brokers, but the consumer and good brokers will run them out of the business sooner or later. Bottom line, I don’t see YSP going away anytime soon…or ever! You may have a fairly good idea with your RateSpeed vision, but there is too much value and service that many brokers give to borrowers. Regardless of the service or product you are selling, people will buy, if you can provide them with what they are looking for. Price isn’t a top concern when the “want/need” is met. Sure, there are some unethical brokers, but the consumer and good brokers will run them out of the business sooner or later.

]]> By: Tomas Zubicek http://thexbroker.com/2008/04/15/mortgage-yield-spread-premiums-and-the-transparency-thing/#comment-2424 Tomas Zubicek Thu, 17 Apr 2008 00:45:27 +0000 http://thexbroker.com/2008/04/15/mortgage-yield-spread-premiums-and-the-transparency-thing/#comment-2424 Wonderful discussion and perfect post. Very valuable points you all have , let me just join the party and say my opinion on the real Cause of the Real Estate mess right now.While transparency is important and I would say ethically crucial in closing the deal, I think the main cause of the disaster right now is, that too many people took the real estate market as a free lunch and in a foolish hope, they will resale the bunch of houses, they bought for speculation pretty quick and still make an easy "buck", they forgot, what they really should be focused on, and that is, the price of the House. Agree, or disagree, my view on this is, that in this case, the house, or the property is the commodity here... Just a thought, I liked that discussion guys... Wonderful discussion and perfect post. Very valuable points you all have , let me just join the party and say my opinion on the real Cause of the Real Estate mess right now.While transparency is important and I would say ethically crucial in closing the deal, I think the main cause of the disaster right now is, that too many people took the real estate market as a free lunch and in a foolish hope, they will resale the bunch of houses, they bought for speculation pretty quick and still make an easy “buck”, they forgot, what they really should be focused on, and that is, the price of the House. Agree, or disagree, my view on this is, that in this case, the house, or the property is the commodity here…
Just a thought, I liked that discussion guys…

]]> By: JeffX http://thexbroker.com/2008/04/15/mortgage-yield-spread-premiums-and-the-transparency-thing/#comment-2420 JeffX Wed, 16 Apr 2008 20:04:44 +0000 http://thexbroker.com/2008/04/15/mortgage-yield-spread-premiums-and-the-transparency-thing/#comment-2420 Bryant, you hit on one of the most hypocritical, greasy handed lobbyist, ludicrous aspects of the mortgage industry as a whole. The confusion this two-faced approach causes consumers to make poor decisions when shopping for a mortgage. IMO, EVERYONE MUST DISCLOSE, special rules/exceptions for one part of an industry is no good for the entire industry. RateSpeed is meant to level the playing field. Brokers and consumers should rally around it's mandatory use ;) Bryant, you hit on one of the most hypocritical, greasy handed lobbyist, ludicrous aspects of the mortgage industry as a whole.

The confusion this two-faced approach causes consumers to make poor decisions when shopping for a mortgage.

IMO, EVERYONE MUST DISCLOSE, special rules/exceptions for one part of an industry is no good for the entire industry.

RateSpeed is meant to level the playing field. Brokers and consumers should rally around it’s mandatory use ;)

]]> By: Bryant Keefe http://thexbroker.com/2008/04/15/mortgage-yield-spread-premiums-and-the-transparency-thing/#comment-2419 Bryant Keefe Wed, 16 Apr 2008 19:54:04 +0000 http://thexbroker.com/2008/04/15/mortgage-yield-spread-premiums-and-the-transparency-thing/#comment-2419 I worked for a Mortgage Bank for 4 years are we did not have to disclose our "margin" to the client. Now that I am a broker it must be disclosed. How will the industry address this disparity and treat the consumer fairly? At the end of the day the broker model is honest and banking is the one hiding fees from the consumer. Thanks, Bryant I worked for a Mortgage Bank for 4 years are we did not have to disclose our “margin” to the client. Now that I am a broker it must be disclosed. How will the industry address this disparity and treat the consumer fairly?

At the end of the day the broker model is honest and banking is the one hiding fees from the consumer.

Thanks,

Bryant

]]> By: JeffX http://thexbroker.com/2008/04/15/mortgage-yield-spread-premiums-and-the-transparency-thing/#comment-2412 JeffX Wed, 16 Apr 2008 16:30:34 +0000 http://thexbroker.com/2008/04/15/mortgage-yield-spread-premiums-and-the-transparency-thing/#comment-2412 @Joshua: YSP's have been the profit centers of the mortgage industry, although that is most certainly not their intent. Congrats for drawing the wrong type of attention to yourself. Wal-Mart is a retail store, this is the mortgage industry. If Wal-Mart entered the mortgage industry as a mortgage broker they would have to disclose YSP (and other costs) just like everyone else. They could still 'hide their mark-ups' on toothpaste but would have to adhere to the requirements of the lending industries when selling mortgages. Is it clear yet why 'The Wal-Mart Analogies' are 'misdirected' yet? @Robert: I know you're a UMB, so this post is singing to the choir for you...I agree with your thoughts and would like to see more originators focus on expertise and other tangible value... Put rates and YSP on the table to satisfy the consumers want to know, then blow them away with what they don't and earn their business. @Joshua: YSP’s have been the profit centers of the mortgage industry, although that is most certainly not their intent. Congrats for drawing the wrong type of attention to yourself.
Wal-Mart is a retail store, this is the mortgage industry.
If Wal-Mart entered the mortgage industry as a mortgage broker they would have to disclose YSP (and other costs) just like everyone else.
They could still ‘hide their mark-ups’ on toothpaste but would have to adhere to the requirements of the lending industries when selling mortgages.

Is it clear yet why ‘The Wal-Mart Analogies’ are ‘misdirected’ yet?

@Robert: I know you’re a UMB, so this post is singing to the choir for you…I agree with your thoughts and would like to see more originators focus on expertise and other tangible value…
Put rates and YSP on the table to satisfy the consumers want to know, then blow them away with what they don’t and earn their business.

]]> By: Robert D. Ashby http://thexbroker.com/2008/04/15/mortgage-yield-spread-premiums-and-the-transparency-thing/#comment-2408 Robert D. Ashby Wed, 16 Apr 2008 15:01:24 +0000 http://thexbroker.com/2008/04/15/mortgage-yield-spread-premiums-and-the-transparency-thing/#comment-2408 YSP is a tremendous benefit to the client, when used properly that is. As you already know, I have no problem letting people know how much I make on a transaction, and I even agree to that fee right up front. The problem is that focusing on YSP and other "cost related" issues fuels a "lowest rate and fee" craze, further commoditizing the industry. While getting the lowest rate and fees is a good objective, the better objecive is to find the mortgage professional that provides the best value!!! That means, reasonable rate and fees for the expertise, service and beyond for the transaction. After all, getting the lowest rate and fees on the wrong mortgage can be more costly than paying more to ensure you are in the right one. YSP is a tremendous benefit to the client, when used properly that is. As you already know, I have no problem letting people know how much I make on a transaction, and I even agree to that fee right up front.

The problem is that focusing on YSP and other “cost related” issues fuels a “lowest rate and fee” craze, further commoditizing the industry. While getting the lowest rate and fees is a good objective, the better objecive is to find the mortgage professional that provides the best value!!!

That means, reasonable rate and fees for the expertise, service and beyond for the transaction. After all, getting the lowest rate and fees on the wrong mortgage can be more costly than paying more to ensure you are in the right one.

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