Mortgage Updates

It is quite remarkable that the US Senate will be voting on an issue as important as this with only a one week public opinion time.  Below is the petition signed by over 58000 people to vote "NO" on this outrageous legislation.

To:  U.S. Senator Jon Kyl, U. S. John McCain, President George W. Bush, U. S. Rep Harry E Mitchell

We want to express our opposition to H.R. Bill 3915. We believe it is burdensome to the independent mortgage broker, anticompetitive, and in the name of consumer protection, it will actually harm consumers. In an already tough lending and real estate environment, this bill will put additional unneeded pressure on real estate prices and cause unforeseen harm to homeowners, mortgage professionals and real estate professionals everywhere. It will also limit the choices consumers have in finding a residential mortgage loan to strictly large financial institutions.

As a mortgage banking professional with over 25 years experience in the real estate and lending industry I am still amazed at how bureaucrats think they can legislate "honesty" into our culture and business climate. (Especially when many have conveniently, compromised honesty away.)  It is unlikely that our legislators really are in this to protect the unwary and naive consumer.  This is more likely to be an orchestrated maneuver by the banking sector to create a monopoly in mortgage originating.

Let's first define "yield spread".  Most consumers have never heard the term.  Yield spread is the difference an investor is willing to pay for a real estate secured loan based on an above market interest rate.

We are all familiar with the term "buying down" your interest rate.  Paying points to get a lower rate.  Well, yield spread is just the reverse.  In turn for a higher rate, the originating lender is paid points, by the investor. 

Those points can then be used any number of ways:

* They pay closing costs on refinances;

* They pay closing costs for buyers short on cash. 

* Yield spread can pay for a temporary rate buy dow, allowing a buyer to pay less and qualify at a lower rate. 

* Yield spread can also be used to compensate the bank and loan consultant for their work. 

Unfortunately, there have been abuses by unscrupulous and mostly unlicensed brokers and their loan agents.  Just as real estate sales and values proliferated over the last few years so have the lending "fast buck" artists.  This industry has seen it's share of greed, utilizing fraudulent techniques and taking the all too willing consumer for a ride, their money and credit. 

A better option to HR 3915 would be to require real estate licensing for all lenders, including bank loan originators who are currently exempt.

If you agree and wish to ad your name to the list of HR3915 opponents just click the link below:

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