If you thought that yield-spread premiums might be outlawed by Congress, think again. In an interview with NationalMortgage News this past week George Hanzimanolis, president of the National Association of MortgageBrokers, said the trade group has gone over the YSP issue with Rep. Barney Frank, chairman of the HouseFinancial Services, and believes Rep. Frank finally understands YSPs and how they benefit consumers. "Heunderstands the need for it," said the NAMB chief. For the full story see the Monday edition of NMN.Don't subscribe? Call: (800) 221-1809
As for YSPs and how they are disclosed, I didn't get it right last week. I also got a quick education from severalbrokers and bankers on disclosures and how YSPs can be used for good. In total, I received 500 e-mails — most ofthem professional in their tone except for a certain reader who shall remain nameless. Yes, YSPs are disclosedon the HUD-1 form and on the good-faith estimate. The only thing I can say in my defense is that I've heard toomany stories about some brokers not fully explaining (verbally, that is) the YSP to the consumer prior to closing.Last week, I spent quite a few hours interviewing brokers and bankers about YSPs, including Mr. Hanzimanolis andA.W. Pickel III, the former NAMB chief. One question I asked brokers and bankers is this: does the phrase"yield spread premium" appear on the HUD-1? Mr. Pickel and others told me that it did. So, I went outand got me a HUD-1. Lines 803 - 813 are blank and that's where the phrase YSP is supposed to appear. "It'styped in by the banker," one broker pointed out. Mr. Pickel noted that the YSP language may not necessarilyappear on the GFE. "It might be called 'compensation to the broker'" or something like that, he said.A kind banker/broker named from Virginia named Roland explained that brokers don't have much control overwhat goes in the "boxes" on the closing documents. Another pointed out that the mortgage banker (thefunder of the loan) controls the docs, not the broker. Roland also said brokers, in general, "don't need tobe making four points on a deal." That sentiment was echoed by others. But I will concede the argument manybrokers made that YSPs (depending on how they are structured) can help consumers get into a house by reducing closingcosts. The closing costs are "paid for" by the consumer paying a higher note. The higher the note rate,the higher the yield spread, which is "paid outside of closing" or POC. I have no problem with YSPs —and I hope that any fair-minded politician would feel the same. One thing seems clear: loan brokers that aren'tverbally explaining YSPs (broker compensation, take your pick) to the consumer had better start. I heard from manygood brokers out there who feel their reputations — which they've worked hard for many years at building — arebeing endangered by "bad" brokers who helped facilitate crummy YSP transactions. And finally, the chiefcomplaint I received last week is this: why aren't mortgage bankers disclosing their servicing-released premium?Now that I've settled the YSP matter, let's talk about RESPA
Meanwhile, I'm doing some research into Friedman Billings Ramsey, its (past) promotion of REIT structuresfor mortgage firms, and its purchase of First NLC. If you have any information or want to talk (Iprotect sources) send me an e-mail at
THIS JUST IN: Aegis Mortgage, which is in bankruptcy, has sold its Houston servicing platformto an undisclosed buyer for a very cheap price. Watch MortgageWire next week for an update
Heads have rolled out at Merrill Lynch (Stan O'Neal) and Citigroup (Charles Prince)because of the huge subprime hits those firms have taken. Among ABS issuers last year, Citi ranked first, Merrillsecond. Deutsche Bank, Lehman Bros. and Royal Bank of Scotland ranked third, fourth and fifth,respectively. In other words, stay tuned
According to the eMortgage Industry Directory, Wall Street firms own residential servicers thatcontrol $115.7 billion in subprime loans or roughly 8.52 % of the market. To order the MID e-mail
WASHINGTON NEWS: According to Brian Collins, reporting in MortgageWire on the pendingpredatory bill, Rep. Gary Miller, R-Calif., proposed an amendment to clarify that YSPs are permitted ifthe broker's fee is disclosed early in the process and if the fee is not changed based on the consumer's decisionto finance certain closing costs.
LOAN ABUSE STORY OF THE WEEK: "I attended a mortgage event in Chicago last year and sat at a lunchtable with some LOs from California. Two men were bragging how they made up to five points on subprime payment-optionARM deals. My processor was with me and it made both of us sick." — Kathy from Washington. Have a loan abusestory and want to tell me about it (on the record or off), send an e-mail to
DATA NOTICE: Need annual rankings and profiles on the top residential lenders and servicers? Need commercialmortgage banking information as well? Try the eMortgage Industry Directory, an online book that tracksthe nation's top 400 lenders, 300 servicers, top 85 subprime and much, much more. The e-book also provides a specialanalysis on America's subprime crisis. To order e-mail
