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Tuesday, April 12, 2011

New Loan Originator Compensation Rules add .125% or more to Interest Rates!!!

Now Loan Originators need to be paid the same on every transaction. On the surface that seems like a laudable goal.

However, this stifles competition as Loan Originators will no longer be able to offer a better price to the consumer by sharing their commission to obtain better rates/fees.

If there are any errors in a transaction that create additional costs, say for instance a lock extension fee or a loan being re-priced because the credit score decreased at closing, the loan originator cannot take that out of the Loan Officer’s commission.

That cost must be borne by the lender. So across the board, lenders, knowing that they have this new potential liability on every single transaction, must price that into their rate/fee structure.

“That plus the increase in administrative costs will mean an average estimated increase of more that .125% to interest rates for every loan going forward.”

Today the housing market faces strong enough headwinds, without new bureaucratic rules that artificially increase interest rates and make it more expensive for new homeowners and thus making it harder to buy and sell homes. As bad as the new rules are, the timing for their implementation is even worse.