…in Washington state. It’s only a matter of time: The Washington State House and Senate have both passed SB 6381. The March 4th House vote was 93 Yeas, 0 Nays, 0 Absent, 5 Excused.

This bill will now go to Governor Gregoire’s desk where she will likely sign it.

There are other state legislative changes on the horizon including SB 6452 which takes aim at yield spread premiums, requiring mortgage brokers/LOs to refund the difference between any YSP that was quoted at application time, and the final YSP earned at escrow, essentially wiping out a way for a broker/LO to earn a higher fee if interest rates go down on the wholesale side, but the consumer, being unaware of how the mortgage market works, is fine with a higher rate. This bill is still in committee but also looks likely to pass. Yes, yes, I know YSP can be helpful for consumers who do not want to pay any closing costs. The ability to structure loans this way is not effected. Instead, the ability for a broker/LO to earn a higher YSP than initially disclosed would go away. The majority of brokers and LOs I talk to do not have a problem with SB 6452. It makes the broker’s compensation transparent. Those who are able to justify their fee are completely fine with being accurate and honest up front in regards to their compensation.

SB 6381 on the other hand, will radically change the way brokers and loan originators interact with the consumer.

Fiduciary duties does not mean a broker/LO will have to promise to obtain the best rate or the lowest fees or the best loan program. Instead this means the broker/LO will be required to put their client’s interests ahead of their own interests to make the loan. Fiduciary duties will be the subject of great debate during the next many months after the Governor signs this bill and it is sent to the state regulators for rule-making hearings.

Interestingly, there is a small sentence at the end of this bill that is largely going unnoticed by the broker/LO community because of the fear of the unknown surrounding fiduciary duties:

“A mortgage broker may contract for or collect a fee for services rendered if the fee is disclosed to the borrower in advance of the provision of those services.”

Earning a fee for service changes, for the better, how brokers and LOs could be compensated. Right now, a broker/LO can only earn a fee if a loan is made (with some very minor exceptions.) This compensation system creates a structure where brokers/LOs are externally rewarded for making lots of loans, whether or not a mortgage loan is in the best interest of the client.

Many (not all) Brokers/LOs spend countless hours in a consulting and education role helping homeowners restructure their finances, improve their credit score, and so forth. However, the broker/LO cannot earn a fee for such services. ONLY when a loan is made can they earn a fee.

That will change after this bill goes into effect.

The consequences will be a separation of the men from the boys and the women from the girls. Those with the knowlege, skills, education, patience, experience, and other highly honed consultive skills will be able to charge more for their services and they will be worth it.

Memorizing sales scripts for how to “close” the customer is so 2007.

I use to stop by and read seattlebubble once a week. Now I visit several times a day. The place to go is the forums, where other seattlebubble readers stop by to put all kinds of interesting questions up for debate, offer interesting articles about the current state of the industry that I may have missed during the day, provide critical analysis of real estate statistics, debate what’s being said in the main stream media, and I like this blog for the entertainment, which is really what blogs can be at times: entertaining.

When I first visited seattlebubble in early 2007, I found the voices of people who were questioning mainstream real estate industry tactics and strategies that I too had questioned during the bubble run-up years. I believe we have a lot to learn from people who do not necessarily agree with us. If raincityguide is mainstream rock and roll, seattlebubble is alternative punk rock. If raincityguide is macaroni and cheese, seattlebubble is mac and cheese with ketchup. If raincityguide is “No Country For Old Men,” seattlebubble is “I Drink Your Milkshake.”

Real estate agents in Seattle should read seattlebubble because there’s a good chance that your customers are reading it.

So why do I bring this up today? Seattlebubble has made it to the semifinals of the metroblogging contest. Simple concepts of game theory are played out here: what is good for your competition is also good for you. Cast your vote for seattlebubble here.