Start making lemonade folks, Uncle Sam has a Nationwide Lemon Farm.

I’m sure in your situation it makes more sense to use correspondent lending. In mine, it makes more sense to use brokered lending. I’m also pretty sure that if brokered lending made a better fit for your client, you would recommend it over correspondent.

I never claimed that any individual bank’s brokered rates are less than their correspondent rates.

I said:

“I now only broker loans, as correspondent does not seem to provide as competitive rates as brokered”,

I also said

“The brokered pricing has been consistently better.”

I should have been more precise in my use of words. I meant to say that the BEST brokered pricing has been consistently better than the best correspondent pricing (from what I have experienced directly). As an aggregate, correspondent lending may have better pricing than brokered loans (probably does), and at any individual lender/bank, their correspondent line may be better than their brokered prices (as you demonstrated).

For that same Friday, I have a different lender that will pay 100.625 at 5.375% 30 yr fixed on a 30 day lock (for a brokered loan), which is better than Flagstars correspondent pricing of 100.189. Truth is, you probably have that same pricing available too, and no doubt would use it, if in your judgement, it was the better choice for your borrower.

While I said I only use brokered loans now, if, and/or when I see correspondent rates that are better priced or more suitable for my clients (and I’m sure someday I will), I will be sure to use them.

Again, I do not see this as “one of us is right, and one of us is wrong”, and I trust you do not either. It is just a different approach, to a similar positive outcome, that of doing right by our clients.

When I first began in mortgage 8 years ago, after leaving the escrow/title industry. I was VERY sensitive about YSP as I would review them with borrowers during signings when they would ask about the dollar amounts shown in parenthesis.

Experience has allowed me to be very comfortable with disclosing what I make as a correspondent. I have no problem telling a client that the lender is going to pay me x on the back end or that the lender is paying zelch on the back and therefore the borrower is paying for the origination.

I’m completely transparent with my compensation.

Check out Flagstar’s rate sheets. They show both their Broker and Correspondent rates.

For Friday’s rates for 30 day:

Broker: 5.375% is just barely below par pricing at 99.914. (For any consumer out there…this means that if you pay 1 point, the lender is making 0.914% for origination).

Correspondent: 5.375% at 100.189%. (If the lender charges 1% origination, they make 1.189%)

Broker: 5.5% is at 0.360%. back.

Correspondent: 5.5% is at 0.635% back.

As a correspondent, with this example, I could easily do 5.375% at 1 or 5.5% at a half point. It totally depends on what the scenario is as far as how I price a loan. This illustration is just to show you that Correspondent Lending receives better pricing than brokers. Why?

Correspondent Lending takes on the credit risk of the loan as we’re underwriting the loan and funding it in our credit lines.

It’s also been my experience that brokered loans have higher costs associated with them than when you close a loan in your companies credit line (again, this just may be Mortgage Master’s cost are lower…I just know “my experience”).

Different lenders do provide different companies different rate sheets. Let’s say Flagstar (since we’re picking on them) decides that Mortgage Master has a terrible lock fall out…they could adjust our pricing on our rate sheets by 0.25% in fee (or what ever they want) or if they’re really trying to get our business, they may sweeten the pot. All lenders do this.

Viva la Differance!

Brian Brady did an excellent job comparing the difference between Correspondent Lenders and Brokers…click here.

That’s allright, we can talk here. Thanks for the offer to communicate offline, I’d like to take you up on that as well.

I said,

“I now only broker loans, as correspondent does not seem to provide as competitive rates as brokered”,

and you disagree. We are both right.

I understand that different mortgage brokers (and loan originators) have different correspondent pricing. I can only factually report on the broker vs correspondent pricing that I have personally seen. The brokered pricing has been consistently better.

I have no doubt that the pricing and compensation structure is different in our respective position, and I have no idea which is better. I have consistently endeavored to put myself in the best position I can to help my clients.

In the course of that process, I got tired of all the Brokers selling the benefit of using correspondent lines (to the loan originator) by saying “…and you don’t have to disclose YSP”.

I do not need to hide my compensation (and/or that of my broker) from my borrowers. As long as my clients get great service at a competitive price, and I can take a paycheck home, everyone is happy.

It is unfair that banks and correspondent lines can legally hide their compensation, while brokered loans must disclose it, but I can live with that unfairness. I choose to fight the important battles, such as preserving the right to receive YSP compensation for brokered loans (which, if applied properly, benefits the consumer).

I have a sense (based on your written body of work)that had you and I followed the same paths to get to where we are now, there would not be much difference in our philosophies. Since we each come from our unique experiences, we differ in our outlook.

Viva la Differance!

And, if it makes any difference, I have 5 older sisters, and 2 younger ones. I have learned a lot from them all!

Fascinating arguments!

I have worked where I did not have to disclose YSP (direct lender/bank). At the time I just didn’t know what it was, but I knew we did not have it.

In general, I believe we had higher costs and rates than did the wholesale channel, but since I did not have access to those rates, i could not confirm it.

I now only broker loans, as correspondent does not seem to provide as competitive rates as brokered. I have ALWAYS had to disclose YSP, and it has not been an issue even once. Not at initial disclosure, not at signing. Let’s hope for the CONSUMER’s sake they do not do away with YSP, as it removes a very valuable tool for them in the lending process.

Let’s face it, everybody thinks the guy next to him makes too much and works too little, and think the inverse for himself!

Let the marketplace work. Abolish APR. It’s the dumbest way EVER to shop for a loan (Rhonda correctly points that out in nearly every blog).

To make a rational comparitive decision, the borrower only needs to know 3 things (listed in order of importance):

1. What are the terms of the loan program, and is it appropriate for the situation.

2. What are the loan costs.

3. What is the interest rate and payment(s).

I generally quote on a “cost not to exceed” basis, so that one variable is eliminated for the borrower. If a borrower wants to know what I am being compensated, I would offer a range of compensations, as I cannot know exactly what I will make until a loan closes, as the costs that I have to cover may vary.

I lose a lot of business by this approach to competitors that dizzy up the borrower with bogus or misleading numbers, but I mostly get to keep the clients that I WANT to work with. I do NOT need all of the borrowers in the world, for me to be happy and moderately successful.

If LOs want to enter the world of professionals, they’re going to have to pledge membership dues to a professional organization that would oversee ethical conduct, above and beyond state and federal law.

today, any LO could say a personal “oath” to the universe: “I pledge to be a fiduciary.” However, without any oversight of that pledge, it’s just like any other promise we all hear out there:

A promise for great service
A promise for low rates
A promise for low fees
A promise for a no cost loan (the biggest broken promise of all)
A promise to put the clients interests ahead of ones own.

Any of these promises are subjective, like beauty, love, or art. They mean different things to different people.

When an industry group decides to become a profession, they get together and identify common values of the industry, virtuous character traits that they believe others in the industry, including their competitors, should aspire to, and then they also agree upon certain principles of behavior; action-oriented ways of interacting with clients, with competitors, and with the general public. All this generally leads to promoting good consequences when consumers interact with mortgage people, and this also leads to consumer confidence in the industry, which we’re sorely lacking right now.