Russell...I work for a mortgage bank, but i'm with ya.  frankly...it's BS....because we're not "federally chartered" we are out of the mix b/c of 4050 when it comes to fair competition.  I used to work at Wells and there was more fraud that went on there than anything that I've experienced at our mid-sized banking company that actually lives by Christian values....get involved with the legislative committees of mortgage bankers or brokers assoc....keep the faith dude...i'm with ya.

While I don't necessarily think the laws are well thought out, I wouldn't have so much of a problem with them if they applied to all loan originators.  If Illinois and other states want to pass stupid laws, then fine, but make them apply to everyone, not just one set of businesses.  Unfortunately, the issue now is at the federal level, so the states couldn't even force the banks to abide by these laws even if they wanted to.  It is unfortunate because it is the consumer who is really going to be hurt in the end.

I couldn't agree more....you have people in ivory towers saying that lenders that are FDIC approved are less likely to commit loan fraud or rip off a consumer than you or I....Gimme a break.

I hear what you are saying Russell, but I've worked now with a bank for a long time and see my local broker friends get away with 10 times more than I ever could. While I realize that my experience doesn't make up for a majority of the country I certainly don't think that the fraud is necessarily more rampant in banks than brokers or vice versa.

I do agree that we should all be regulated evenly though, but I don't think that one entity is more at fault than another. Having worked for the largest lender in the country we were hardly able to blow our nose without corporate knowing. Just my 2 cents.

What is going to happen is that smaller local and regional players are going to be pushed out by the laws due to the federal exemptions.  In other words, the only way anyone is going to be competitive is to align themselves with a net branch or become a subsidiary of a mega bank.  It is unfortunate, because there are many very good local brokerages and smaller bankers who are now going to be placed a competitive disadvantage.  The smaller companies are not going to be able to compete effectively against larger banks because many of these new laws have processes in place that significantly disadvantage brokers.  For example, in Illinois, you have to go to mandatory credit counseling if you get your mortgage through a broker, but do not if you go to a mega bank.   Who do you think consumers are going to want to deal with?  The choice is save a little bit on rate with the broker and waste several hours of their time going to some credit counselor or take a slight hit on their interest rate with a bank and don't have to worry about it.  In addition, some laws are outlawing stated income loans, so brokers won't be able to use these products, but borrowers will be able to get them through their megabank.

I don't think banks commit more fraud than brokers and vice versa, however, I am tired of mega banks acting like their stuff don't stink and brokers taking the heat for everyone. I also worked at a large bank and I left because their mode of operating wasn't in my client's best interest.  Ironically, the place is now closed.

In addition, this should be of grave concern to Realtors too.  Banks have been itching to get into real estate.  What this means is if they are allowed to also sell real estate, they are not going to have to follow the same laws that govern Realtors either. 

I've noticed that a lot of folks in the media use the term mortgage broker almost like Xerox used to be used as a generic term for copy machine.  I saw one article where the lender was referred to as the mortgage broker and then later it was mentioned that the lender was a large multistate lender - probably not a broker at all.

I wonder how much of this legislation is pre-packaged by the banking industry for the law makers?

Bob Mitchell

ValueList 

Bob,

That is very astute of you.  I know here in Illinois, the main lobbyist for House Bill 4050 was a non-profit organization named the Greater Southwest Development Corp.  If you look, there are several mega and state bankers on the Board of Directors.  One has to ask if this law is really about preventing foreclosures, why lobby for a bill that doesn't even impact your own members who are also in the business of making mortgage loans?  I am not a big conspiracy theorist, but it does seem fishy to me.

The banks also tried this with yield spread premiums to brokers.  Banks earn their money the same way except it is called a service release premium.  The only technical difference is when the money is actually earned.  At closing for the broker or after on the secondary market for the banker.  The impact to the consumer is the same.  Of course, RESPA found it necessary to force brokers to disclose while bankers can hide it.  This was a clear attempt to make it look like brokers were charging more when they weren't.  The FTC studied it and found consumers chose more expensive banker loans with no YSP disclosed when compared against brokers who had to disclose YSP even though the loan was cheaper.