Good comments, what does MAI stand for?

Mortgage brokers have been surfing in a grey area regarding their legal and business relationship to borrowers. The borrower chooses them, based on advertising that implies that they will work on the borrower’s behalf to obtain the best loan. The borrower pays for the mortgage broker out of the closing statement (whether revealed or not). But until now, the mortgage broker has been a “free agent;” not required to provide the best deal, free to push a borrower to a higher-interest loan or one with other objectionable terms if that will maximize the YSP. Of course not all mortgage brokers did this, but now there’s a law against it. Now there’s no question that the mortgage broker is working FOR the borrower rather than for the lender or for him/herself. And that’s a very good thing. Not a panacea; I think I read that mtg brokers in California are already fiduciaries, and that didn’t prevent mortgage fraud and abuse. But a good start.

It looks like that law passed, too. To me it looks like housekeeping. Those companies are already licensed by DFI, they’re just licensed as consumer loan lenders.

A consumer loan lender that also brokers out is also subject to the state’s Mtg Broker Practices Act already. Looks like the law you are referring to will ultimately be signed.

http://apps.leg.wa.gov/documents/billdocs/2007-08/Pdf/Bill%20Reports/House/6471.HBA%2008.pdf

http://apps.leg.wa.gov/documents/billdocs/2007-08/Pdf/Bills/Senate%20Passed%20Legislature/6471.PL.pdf

It’s going to be a long year ahead for DFI.

What is the story with the 300 mortgage companies that are NOT regulated be DFI?

First I heard about it was in Phoung Le Cat’s blog today. There is a proposal to have them be regulated like everyone else.

http://blog.seattlepi.nwsource.com/consumersmarts/archives/133755.asp#extended

Yes, I tried to do some cursory research, but how do you search for a negative?

Found the latest numbers for licensed mortgage brokers is now only 1,380 (down from the last number I saw of 1,900), and LO’s at 6,337, which is up from the last number I remember (5,700 or so, at EOY 2007)

http://apps.leg.wa.gov/documents/billdocs/2007-08/Pdf/Bill%20Reports/Senate%20Final/6471.FBR.pdf

Relax. You will be just fine. No one is out to get someone who works as hard as you do, and as transparently. If there is ever a trial, you can call me! For all the good it will do….:)

Anyone that has an LO# or MB# will fall under the scope of the law.

To be sure, there will be changes, and there will undoubtably be mountains of additional paperwork, much of it redundant, and more confusing to the borrower. And there will still be crooks, just less of them. And there will be newbies, just less of them.

But ask this question;

Do you think there are more, or less, financial advisers today, than there were before they were required to act fiduciarily? Was that industry financially devasted by the change?

I don’t have the answers, the questions are rhetorical, but I think illustrative of what may soon occur in our business.

You and I have exchanged opinions on brokered lending vs correspondent lending, myself preferring the former, and you preferring the latter, each capably and justifiably defending our views, and neither locked into a position set in stone.

This week, I locked my first correspondent loan, as the pricing and terms were very attractive.

For those playing at home, not in the biz, one of the key differences differences between brokered loans and correspondent loans, is that the proposed (and exisiting) laws do NOT require the broker or loan originator to disclose the YSP on correspondent loans, even though the correspondent lender knows perfectly well what the YSP incentive is.

The new fiduciary bill does not adequately address this, but perhaps DFI will.

The proposed law states that we MUST disclose any conflicts of interest and ALL compensation.

It will be interesting to see how that conflict plays out.

Regarding the correspondent loan that I locked, I considered NOT disclosing the YSP, but concluded that to not do so would be contrary to all that I have advocated for, even though it is legally permissable.

I am sure I am not alone in this concept, but I suspect it is currently rare. Every broker with correspondent lines will tout the advantage to the prospective LO by saying “and you do not have to disclose the YSP, just like the banks”.

We’ll see what happens with that.

I’m sure, once again, I will march left as the industry marches right.

Most of us will end up in the same place, regardless!

I don’t think this particular bill will have any effect on LOs leaving the industry. I have fielded a number of calls today from mortgage brokers who are worried about the additional liabilities.

If folks are thinking about a career shift, I have found that these things are multi-factorial.

This law is a state law that affects mortgage brokers and LOs licensed under the state’s Mortgage Broker Practices Act and also will effect some entities licensed under the Consumer Loan Act, meaning, those consumer loan lenders that also broker loans.

This law, when signed, will not apply to state or federally chartered banks or mortgage banks.

This is good news because brokers and LOs have a chance now to differentiate themselves.