Like it or not, the Fed’s rule on how mortgage originators can be compensated is in full effect today. It’s hard to tell exactly how much this has impacted mortgage rates as mortgage backed securities are being beat up pretty hard from fears of inflation (rates would be higher today regardless of the Fed’s rule).
Mortgage originators no longer have flexibility to price rates as see as fair. Mortgage originators can no longer use their commissions to help their clients pay for any closing cost and sometimes, this may take place without the borrower even knowing about it (extension fees, for example). Even if a mortgage originator makes an error on the good faith estimate beyond the allowed tolerance, the mortgage originator cannot pay for it! Because of the additional cost of having to pay mortgage originators not based on rate and having to absorb the cost to “cure” a good faith estimate, mortgage companies, credit unions and banks have had to slightly increase rates. So who winds up paying for the Fed’s new rule? The borrower.
Employers of mortgage originators have had to create to compensation plans since a majority of LOs were paid by the borrower from origination points, the lender with rebate or a combination of both. Many mortgage companies are trying to use this as an opportunity to recruit LOs by trying to offer a sweeter deal than what they’ve been presented. Mortgage originators are also just learning how much their rates have been adjusted to cover the increased cost. There’s going to be trade-offs. The higher the LOs pay, the higher the rate will most-likely be…the Feds rule hasn’t changed this…it’s only prevented the LO from increasing the rate to increase their pay. Many mortgage originators are receiving RAISES from the new rule if they did not overcharge borrowers in the past. It’s bittersweet since many of us would still rather not have this rule and would prefer to have the ability to help out our clients when they need it. Mortgage companies can come out with different pricing plans “periodically”.
I’m still trying to figure out how I’m going to do Monday’s rate post odds are, most rates will not be priced with a flat point. The consumer will pay or receive rebate what the exact pricing is from the lender. Before the rule, if a rate was priced just under par, I would often absorb the difference and not charge the borrower – I am forbidden from that now.
Regardless of what rate you pick, I’m going to be paid the same. I actually don’t mind that. “Rebate pricing” is still available. The big difference is that credit towards closing cost (as far as your mortgage originator is concerned) can only be done when locking or adjusting the lock. It cannot be from the mortgage originators paycheck.
It will be interesting to see how everyone adjust to this new change and lack of flexibility. Everything is fine…as long as you stick with the cheeseburger with pepsi and chips.
Your choices loan programs and pricing options are disappearing.