Mortgage Servicing Rules - New Rules

[Dion DePaoli]

From the CFPB clarity on the new servicing rules.

[Bill Gulley]

Oh, LOL, you're saying you're a consumer advocate and all of that snooping and going through that is only to benefit the public.....I don't buy that, could be but I wasn't born yesterday.

And, you're wrong Joe, I'm very much a consumer advocate. Thought you were an examiner and understood what the purpose of bank regulatory policy was all about, but either you're playing dumb or you really don't know.

Government is necessary in a capitalistic society, it doesn't function efficiently without government. Policy is set and enforced to ensure a safe and secure banking system for the benefit of our economy. I'm totally against predatory practices, not only is such unethical but much of it is illegal. Such is not in the public interest. Such led to our housing bubble and if it were up to me I'd throw the instigators so far in a jail cell they'd never see the light of day. But, it's not up to me. When you get into big money things are political, let's not be naïve.

While I like the regulatory approach of the CFPB, my concern is more to closing the door to entry into the mortgage loan business. You can see the influences of big business in this country, clearly in the ACA that took on our health care system and the outright war declared by the industry in all kinds activities to sabotage the Act. Pretty much the same here with the CFBP, politicians tried to block it at every turn and not fund it, I'd say the financial industry is accepting the bitter pill and in return they get some protections and new benefits.

There are billions of dollars in seller financed transactions, much of it now must go through servicers and at servicing rates that only a bandit would charge. Secondary market servicing can be as little as an 1/8th of point. Origination fees for such loans are about $200 and that, along with other fees, lenders make these loans with their money and sell them off. A seller financed deal, that actually has less risk to an originator and doesn't use any of their money fees mentioned here are $700, servicing I've seen is $30/35 a month on a loan that isn't even funded. Who owns these originator/servicing firms, ha, they are owned by those in the financial arena, they aren't mom and pop brokerages. $35 servicing would be the cost on a $336,000 loan with actual amounts at risk, yet the servicer is charging that amount on a loan based on an equity amount, no cash at risk really on some $45,000 seller note! I'd say that's a pretty sweet deal. Rip off is more like it.

The most profitable function of any bank is in lending. They are required to have reserves, follow regulatory policies and jump through hoops to be in business. The banks were screaming bloody murder when unregulated mortgage brokers hit the streets and it took about a decade just to have a broker get a license, now, the broker is held to almost the same banking standards in may respects, so that is a big plus for banks to get these small brokers off the streets, for most folks it means if they need a loan they'll have to head to the bank.

Scruggs and other seller financing gurus brought much of these new requirements on seller financed deals, if there hadn't been scammers with the rinse and repeat set ups seller financing probably wouldn't have gotten hammered as it did. It would have been much easier to set out guidelines and set a few different types of loans and just say, use this in all SF deals and just take them to an attorney. The degree of difficulty is much higher than it needs to be, but part of the underlying agenda is to cut out equity financing and bring deals into a bank.

So, while these new regs will be a PITA, they also provide a large financial gain in the system.

BTW, I do understand your resistance and let's wait and see attitude since you don't have a mortgage broker's license, if I were you I'd hope it wouldn't be necessary too, but much of the two recent Acts are pretty clear, doesn't take a genius to read them and say "Oh Crap"! Yes, things are going to change, we just don't know how bad, but it's clear for some it's going to be bad. :)