6 consequences of the Federal Reserve’s rule on loan officer compensation

6 consequences of the Federal Reserve’s rule on loan officer compensation - Positive or Negative impacts for the consumer, hmmmm.  Here's the real world street facts.

The Federal Reserve’s rules limiting independent loan originatior’s compensation (but not the compensation of big banks) are already hurting the consumer in these six critical areas:

1. The loan officer can not lower their compensation to help the consumer, so the consumer will pay more when unexpected costs or situations occur during the loan process. These can be items like a title insurance policy actually being $100 more than expected or some other costs that come-up at the closing table. It is common practice for the loan officer to cover these overages out of their compensation.
2. The lender will have to pay for the unexpected expenses from #1, thus they will have to increase underwriting and processing fees to build-up a slush fund to pay for the overages when the come-up.
3. The borrower loses options resulting in higher rates and/or fees.
4. Service level will decrease because many smaller companies will exit the business, creating a monopoly for the big banks who then can price-fix fees and rates to their advantage. Reduced competition equates to increased costs to the consumer.
5. Rural areas will suffer with few or no lenders in the areas where bigger banks don’t set-up offices. These are the areas that smaller lenders and brokers excel in service.
6. Lower income borrowers will suffer because lower loan amounts will not be available. We are already seeing many larger lenders increasing the minimum loan amount they are willing to fund. Smaller lenders and brokers again excel in these underserved markets.Minorities will also be vastly underserved. An independent study done by George Washington University evaluating over 2.2 million mortgages originated by both big banks and mortgage brokers found that those loans originated by big banks for minorities averaged nearly 2% more in APR than those originated by mortgage brokers: 2.93% APR less to African American borrowers, 1.182% less to Hispanic borrowers and 2.296% less to lower income borrowers of all ethnic backgrounds.The savings on second mortgages were even greater. Overall, independent mortgage loan originators serve minorities and lower income borrowers much better than big banks do.

          Loan amounts under $60,000 are out the window, a thing of the past.  Low income families   that cannot afford a property that is a higher loan, too bad.  You may meet all of the guidelines, you may have the credit and the income, but thanks to the Federal Reserve and their new policy, you have been sent back to the dog house.  Lenders now are not loaning on smaller loan amounts.  There is not a profit in the business of making mortgage loans because of all of the red tape and regulation that has been imposed on mortgage banks.

There are individuals and families that in the one month that this has been in place that have been affected in a negative manner where they are now unable to obtain financing they have been preparing to get.

If you have a problem with this, don't just sit back, but rather contact your Senator, Congressman, Legislators and those that have the ability in Washington to have their voice heard.

I personally have done this, I have gone into Senator Orrin Hatch's office in Salt Lake City, Utah and voiced my concerns to his staff and asked that this feedback be taken back to Washington D.C. to assist the people being affected.

Watch the video below for a great explanation of how independent mortgage loan originators save you money and how the new Federal Reserve rules will harm you.

Clipped from: www.youtube.com (share this clip)