Mortgage Blog

As of April 1, the Federal Reserve made a rule that dictates the compensation of all Mortgage Loan Originators. The plan benefits big banks, hurts small brokers and almost every loan officer in the country is being adversely affected. The upshot of their plan is that the loan originators compensation cannot be based on the profitability of that loan, but must be a set amount that is pre-determined. It also cannot be different from one product to another.

Why could this destroy the First Time Homebuyer loans? Many of these loans are subsidized “Bond “ loans where a government agency provides down payment assistance and/or a below market interest rate, such as the Minnesota Housing Finance Agency’s Minnesota Mortgage Program. These are great programs for consumers but lenders and loan officers have always accepted a reduced revenue from doing these loans because they are of benefit to the buyer. The company received less revenue so they would pay the loan officer less, but everyone felt good about being able to provide housing to someone who might not otherwise be able to buy.

Enter the Federal Reserve and their requirement that the company pays the loan officer the same commission rate on the bond loans as they do on more profitable types of loans. Most companies can not afford to allow their loan officers to offer these loans because the company will lose too much money by offering it. Or the loan officer can choose a lower commission rate on ALL of her loans just to accommodate the occasional first time buyer. Now only the most dedicated First Time Buyer specialists are willing to take the pay cut required to offer these loans.

You can contact me for more information regarding MHFA’s great programs for first-time homebuyers.

Peter 612 701 6816 or pboyle@summit-mortgage.com