“The market seems to think it is going to work because nonbanks are expanding into wholesale as more and more of the banks exit the business,” says Donald Lampe, a partner at Morrison Foerster. “In fact, I see the wholesale business being ramped up by the nonbanks.”
Brokers may have to settle for a 1% to 2% fee, which is “not as rich as before the QM rule,” Lampe says. But he expects broker shops will be profitable despite the QM rule.
The QM rule issued by the Consumer Financial Protection Bureau counts compensation a broker receives from the wholesaler towards a 3% cap on points and fees.
To stay within the 3% cap, some wholesalers are rolling their normal fees (document preparation fee, underwriting fee and other administrative fees) into the interest rate.
“While that helps the brokers, it is not helping the consumers,” says mortgage broker Marc Savitt. That is because the borrower is going to pay interest on $800 to $900 in fees for 15 to 30 years.
Savitt is a West Virginia mortgage broker and president of the National Association of Independent Housing Professionals.
His group continues to urge the CFPB to stop counting the broker’s compensation towards the 3% points and fees cap.
Lender-paid compensation is already included in the interest rate and it shouldn’t be counted twice, the mortgage broker says. “It is going to be detrimental to consumers and the brokers.”
Savitt is president of The Mortgage Center in Martinsville, W.Va.