Water cooler talk and overall complaining has hit a new peak in today's mortgage industry. The new regulations for loan originators will come into affect on April 1, and all over the country, brokers are screaming at the top of their lungs - "This is unconstitutional! They are trying to get rid of brokers! How can the government regulate compensation?" Endless amounts of whining, complaining and threats of quitting. Sorry guys but enough is enough.
The new Frank-Dodd bill and regulations from the Fed have one intention: to stoploan originatorsfrom steering certain clients into higher priced loans in order to make more compensation. On the surface, this might seem unfair and un-American but is it really different than any other business in our country? When you walk into a Wal-Mart to buy a new flat screen television does the price fluctuate depending upon who the customer is and how much the salesman feels like he or she can rip that person off? Of course not, the price is the same for all of us. However, if you decide to leave Wal-Mart and check out the prices at Target, then perhaps you might find a better deal, but Wal-Mart does not change their pricing based on who the customer is.
The new regulations set forth by the FED simply take this widely accepted free market principle and extend it to mortgage brokers. It does not matter who the customer is, the Fed is now requiring that pricing be the same for everyone. A loan originator can no longer whack one customer over the head for 3 points while pricing out another loan for 1 point. Every company must set their lender compensation at a specific percentage of the loan amount and keep it the same for every deal they do.
The truth is that the regulations will most likely not have any affect on the company's bottom line. As any mortgage broker will tell you, over the long term the business typically has an average per deal compensation. So, why not just set pricing at that average? That is exactly what the new regulations are saying. Also, a mortgage company is not locked in to that pricing since they will be able to change it periodically just like Wal-Mart can change the pricing on their televisions. If Target is running a sale and working on lower margins, other stores can react to that and change their pricing. Mortgage companies will continue to have the same flexibility.
At the end of the day, the brokers that are left in the industry will end up making more money. Managers can now set their pricing to a level that makes sense for their current cost structure while not worrying about individual loan originators over pricing or under pricing a deal. Competition will naturally decrease as less competent brokers leave the market. So, stop your whining and start focusing on business development. Americans will continue to leverage the equity in their homes and the mortgage industry will continue to grow in the long term.Brokers should focus less on regulations and more on growing their business. There is no crying allowed in the mortgage industry!
The new Frank-Dodd bill and regulations from the Fed have one intention: to stoploan originatorsfrom steering certain clients into higher priced loans in order to make more compensation. On the surface, this might seem unfair and un-American but is it really different than any other business in our country? When you walk into a Wal-Mart to buy a new flat screen television does the price fluctuate depending upon who the customer is and how much the salesman feels like he or she can rip that person off? Of course not, the price is the same for all of us. However, if you decide to leave Wal-Mart and check out the prices at Target, then perhaps you might find a better deal, but Wal-Mart does not change their pricing based on who the customer is.
The new regulations set forth by the FED simply take this widely accepted free market principle and extend it to mortgage brokers. It does not matter who the customer is, the Fed is now requiring that pricing be the same for everyone. A loan originator can no longer whack one customer over the head for 3 points while pricing out another loan for 1 point. Every company must set their lender compensation at a specific percentage of the loan amount and keep it the same for every deal they do.
The truth is that the regulations will most likely not have any affect on the company's bottom line. As any mortgage broker will tell you, over the long term the business typically has an average per deal compensation. So, why not just set pricing at that average? That is exactly what the new regulations are saying. Also, a mortgage company is not locked in to that pricing since they will be able to change it periodically just like Wal-Mart can change the pricing on their televisions. If Target is running a sale and working on lower margins, other stores can react to that and change their pricing. Mortgage companies will continue to have the same flexibility.
At the end of the day, the brokers that are left in the industry will end up making more money. Managers can now set their pricing to a level that makes sense for their current cost structure while not worrying about individual loan originators over pricing or under pricing a deal. Competition will naturally decrease as less competent brokers leave the market. So, stop your whining and start focusing on business development. Americans will continue to leverage the equity in their homes and the mortgage industry will continue to grow in the long term.Brokers should focus less on regulations and more on growing their business. There is no crying allowed in the mortgage industry!