eddgillespie said:
How much commish do the MB's get from this Denis? Pam has been telling us for years the amount of impact mortgage loan commissions have on our business. I think they just may have some influence on where the market goes too.
Maybe if some salesman doesn't get paid a commish the engine stops. So add to the plan that MB's get an "enhanced" commish to get a troubled loan conversion to a 50 year am.
Edd-
I assume that your question is probative and phrased partly tongue-in-cheek. I've read Pam's post and I agree that she makes some legitimate points. I'm not ready to equate the "refi boom/exotic loan program/housing bubble concern" with agent commissions, however.
Take the Mortgage Brokers out of the equation and assume that every borrower who is running the risk of default deals directly with a lender and avails him/herself to a 50-year mortgage. Question: Will the lack of a MB in that transaction diminish the potential number of such transactions? I think not.
The MB, in many markets, has replaced a lender's in-house lending department. In the old days, banks would have their own loan agent employees; some still do. Many have decided to expand into "wholesale" and use the MB as their sales force. If it were more efficient and profitable for the bank to run its lending business strictly "in-house", it would do so. Having this part of the transaction "out-sourced" doesn't necessarily mean higher costs to the borrower. If the competitive advantage in obtaining a loan from a borrower is based on the borrower's costs + the quality of the product + the time it takes to close the deal, and if MB participation in that equation resulted in it being more costly than having the banks deal direct, the number of MB originated loans would be reduced significantly (such to the point where they would be a specialist and not a generalist as they are today). Add to the mix that their are now lenders/originators who's business is not "banking" (accepting deposits) but strictly mortgage lending, and the business model of having brokers makes sense (for now; the Internet may replace them eventually, except for the "specialists").
So, back to your specific questions:
How much commish do the MB's get from this Denis?
As much as they can vs. as little the lender can pay. Similar to the fee structure of appraisers.
Maybe if some salesman doesn't get paid a commish the engine stops.
Here's the "tongue-in-cheek" part, right? If the product is available, and it is acceptable to investors and borrowers in whatever form it takes, why wouldn't someone be paid for providing the service?
Edd-
In my post I said
What I've read about these products is that they are high in fees and interest, and that the payment is similar to a low interest loan, so as a rule, they are not advantageous to the borrower.
But then I added
However, the key here is that the borrower cannot qualify for anything else. So, if the choice is to have bankruptcy or default on one's credit score vs. signing up for a 50-year mortgage, what is the likely choice?
Advantages to lenders/note-holders are:
1. Eliminates REO activity.
2. Generates new fees.
Advantages to borrowers are:
1. Maintains a low(er) payment, one that is assumed can be met.
2. Protects credit score.
3. Borrower keeps house.
I am guilty of writing my "hypothetical pitch" to the borrower by the loan agent in a sarcastic manner, which I now regret (not all LAs are scum). Had I written it without the sarcasm, and as a straight business proposition-
"I know you are concerned about your payment adjustment going up. It may put you in a very bad position with your cash flow. There is an alternative available; a 50-yr mortgage. The advantages are that you will keep your payment low and not take a hit on your credit score. The disadvantage is that this type of loan carries higher up-front fees and realistically does not start to pay-down the balance until about 20 years into the program. When the market changes, you may be able switch out of this program and into a conventional 30-year mortgage. However, "when" that happens is anyone's guess. So, you should know that if you opt for this program, you should look at yourself as paying a premium for the ability to keep a low mortgage payment and not take a derogatory hit to your credit score. Does this sound like an option you wish to explore?"
Would you view this option any differently?