TheMReport — News and strategies for the evolving mortgage marketplace.
Issue link: http://digital.themreport.com/i/113472
the latest or ig i nat ion ORIGINATION se r v ic i ng "A perverse outcome of a QRM rule would be . . . that we might permanently enshrine the GSEs and other government agencies as the only large-scale source of mortgage credit in our country." S e c on da r y M a r k e t a na ly t ic s —Sen. Bob Corker (R-Tennessee) Congressman Urges Regulators to Think Simple Sen. Bob Corker cautions rulemakers to avoid establishing guidelines that would pull lenders in separate directions. U .S. Sen. and Senate Banking Committee member Bob Corker (R-Tennessee) warned federal regulators to stick to simplified, synchronized lending rules in order to avoid driving out private capital. In a letter addressed to officials for the Treasury, HUD, the FDIC, the Federal Reserve, the Federal Housing Finance Agency (FHFA), and the Securities and Exchange Commission (SEC), Corker said future lending standards must work in sync with the recently issued qualified mortgage (QM) guidelines. Corker specifically pointed to the qualified residential mortgage (QRM) rule, which is being drafted by the six agencies. 52 | The M Report While the rule would tighten up underwriting and risk retention on loans packaged in securities, its current iteration includes an exemption on risk retained for loans sold to Fannie Mae, Freddie Mac, and the Federal Housing Administration (FHA)— an exemption Corker believes may drive lenders away from the private market. "As such, a perverse outcome of a QRM rule that is different than the QM rule would be that we might permanently enshrine the GSEs and other government agencies as the only large-scale source of mortgage credit in our country," Corker wrote in the letter. "With the federal government now standing behind over 90 percent of home loans originated in the United States, a situation that is simply not sustainable, such an outcome would not at all be healthy for our financial system." To avoid that outcome, Corker encouraged the agencies to draft a QRM rule that syncs up with the QM rule's "safe loan" guidelines, reasoning that a loan that is safe for borrowers is also a loan safe for securitization. In a release accompanying the public letter, the senator said, "Forcing lenders to comply with two separate sets of rules isn't good policy, and in this case, it would set back the timetable on doing what we absolutely must do: begin to move away from a complete dependence on the government for mortgage credit in our country." Mortgage Brokers Group Voices Worry over Loan Officer Compensation Rules NAMB's president says the CFPB's compensation rules will drive smaller brokers out of the marketplace and destroy competition. T he Consumer Financial Protection Bureau's (CFPB) new rules on loan originator compensation will inevitably raise prices for consumers and harm small business, according to the National Association of Mortgage Brokers (NAMB). "It seems that every part of these rules imposed by the CFPB is intended to make it increasingly difficult for small businesses to operate," Donald J. Frommeyer, NAMB president, said of the new compensation rules and the qualified mortgage rule. Frommeyer said the majority of the 10,579 mortgage brokers in the United States have five employees at most, and a large portion of the commission they receive on loans goes to paying overhead to operate their business. The new qualified mortgage and compensation rules are "the perfect way to eliminate smaller business operations from the marketplace," which will lead to decreased competition and ultimately higher prices for consumers, according to the NAMB. "This is the very opposite of the CFPB's purpose," Frommeyer said. Loan officer compensation generally ranges from 1.5 percent to 3 percent of the loan amount. The type of loan affects how much the loan officer receives. Under the CFPB's new rules, however, loan officers may not be compensated based on the terms of a loan. According to CFPB Director Richard Cordray, the new rules eliminate a conflict of interest in which loan officers benefit from persuading consumers to take on riskier loans. However, NAMB insists the rules unfairly impact small brokers, which are "an integral part of America."