Brainstorming and HVCC

[Jalexi]

What if rules were put in place to remove the commision incentive from the Mortgage broker? If an applicant for a mortgage was required to pay an up front a fee of $700 plus any fees the mortgage broker incurs (credit reports, etc) and the appraiser and MB were paid at the start of the process wouldn't this eliminate the pressure to inflate values?

Appraiser gets $350, MB gets $350 plus and fees to start file.

Is this workable?

 

[jay trotta]

ask Tater he knows........

 

[PropertyEconomics]

What if rules were put in place to remove the commision incentive from the Mortgage broker? If an applicant for a mortgage was required to pay an up front a fee of $700 plus any fees the mortgage broker incurs (credit reports, etc) and the appraiser and MB were paid at the start of the process wouldn't this eliminate the pressure to inflate values?

Appraiser gets $350, MB gets $350 plus and fees to start file.

Is this workable?

Seven hundred dollars? You are kidding right? Many mortgage brokers make many many times that amount to place a loan. I know of one in my market that has made in excess of $5,000 per loan closing ....

 

[Mztk1]

I have a friend who is an honest mortgage broker, honestly, and he says anyone who gets more than $500 a closing, or takes a yield spread, should not be in business because they're theives.

He's been doing it for about 20 years and joined his father-in-law's mortgage company who was there for years and years before him.

I'm sure nearly all mortgage brokers would disagree with that, but I like what he had to say when we discussed it at length. He is not against a flat fee per file at application.

 

[Ken B]

If you are going to kill the commission-based compensation system for LOs/MBs and replace it with a fee-based compensation system, you will need to do the same thing for sales agents. That's where the pressure starts.

Pipe dreams...

 

[Jalexi]

If you are going to kill the commission-based compensation system for LOs/MBs and replace it with a fee-based compensation system, you will need to do the same thing for sales agents. That's where the pressure starts.

Pipe dreams...

If the LO/MB is guaranteed to be paid regardless of the outcome of the Loan app how can the sales agent apply pressure?

 

[ghrousseau]

I have a friend who is an honest mortgage broker, honestly, and he says anyone who gets more than $500 a closing, or takes a yield spread, should not be in business because they're theives.

He's been doing it for about 20 years and joined his father-in-law's mortgage company who was there for years and years before him.

I'm sure nearly all mortgage brokers would disagree with that, but I like what he had to say when we discussed it at length. He is not against a flat fee per file at application.

So..................when a highly qualified MB gets a very difficult $850,000 loan for a self employed borrower with 3 years of K1's, 1040's, and 1120's and a host of other difficult items he/she only gets $750 to do the loan?? There is such as thing as a reasonable fee for reasonable service. Would you do the appraisal on the $1,000,000 6000 sq ft home for the above loan at $350 max fee no matter how long it took or how much liability you faced? Probably not. Also, are borrowers who don't qualify for a loan still going to have to pay the flat fee upfront? Is the broker going to be able to collect? This could be viewed as disproportionately discriminatory against borrowers with poor credit and high debt ratios. Will this be an incentive for brokers to only market to people they know will qualify? Will they provide the same level of service if they are uncertain about compensation? Price ceilings are a bad idea and have been proven time and time again to restrict supply.

http://econ.ohio-state.edu/sylee/lecture5.pdf

It's more feeeeeeeeeeeel good retoric that doesn't get back to the basic simple problem of lack of enforcement of existing laws regarding fraud.

 

[Mike Boyd]

If the LO/MB is guaranteed to be paid regardless of the outcome of the Loan app how can the sales agent apply pressure?

The real estate agent would find a mortgage COMPANY that he can manipulate. Loan agents are the same. The GOOD ones will get a piece of the action. If you want to see crime in action, take away the commission incentive.

 

[Jalexi]

The real estate agent would find a mortgage COMPANY that he can manipulate. Loan agents are the same. The GOOD ones will get a piece of the action. If you want to see crime in action, take away the commission incentive.

Mike,

Thanks for pointing that out. I was thinking that all parties involved were basically honest, Stupid me!!!

 

[Diego Lopez]

Brokers make much more than $350 per deal, they can make in excess of $10,000 per deal after yield spreads, MB fees, Origination Fees and all other junk fees.

You want to put an end to value pressures, then someone other than the MB must order the appraisal.

I disliked the HVCC at first, even sent in comments pointing out my disagreements, but the more I think about it, the more I realize that if we want to get rid of value pressures, then the appraisl ordering process must be taken away from the person with the most to gain from an inflated appraisal: the MB.