How a mortgage originator is compensated is being reviewed by the Federal Reserve and Washington State's Department of Financial Institutions (DFI). The traditional method of being paid based on a percentage of the loan amount is getting some heat. It's unfortunate because I do believe a majority of the bad actors are no longer in the mortgage industry thanks to the SAFE Act and licensing requirements. Those who do not want to be held to the licensing standards and who want to stay in the mortgage industry will have work for a bank, where they are only registered. Many banks are limiting what and how a mortgage originator "appears" to be paid to the consumer. (Only mortgage brokers have had to disclose their compensation on the back end).
Currently, a consumer can have their mortgage priced with an origination fee (points) or without points, which means rebate pricing is being used to compensate the originator. The loan does not have to be priced with a full 1% of the loan amount, if you look back at even recent rate post at Mortgage Porter, you'll see that sometimes I quoting 0.75% for a certain rate–it all depends on where the markets are at that moment.
I would love to hear back from my readers how you feel mortgage originators should be compensated. I will be leaving the poll on left side of my blog during the month of April. Please vote and feel free to leave your comments on this post.
I'll be sure to share the results with you.
The choices in this poll are:
Flat Fee: My opinion is that if mortgage originators are forced to go to a flat fee. Mortgage companies will still have to compensate them for their "market worth". It's possible that although the fee might look better, the base rate (without discount points) might be higher as it will be set by the bank or mortgage company, and not the originator.
Points: This is currently the most common method with how a mortgage originator is paid. Points can be paid by the consumer or by rebate from the bank/lender.
Hourly: Consumers could select a mortgage originator based on their hourly rate and an estimation of how many hours the mortgage originator estimates their transaction would take.