DISSECTING NEW REGULATION Z CHANGES

            Since we have entered a new calendar year, when new regulations and laws seem to be enacted or promulgated, I will attempt to give you my understanding of what may be trending as it relates to me as a loan officer.  I welcome all comments by my fellow financiers, as well as realtors, brokers, and legislators whom may stumble across my blog.  I thank you all ahead of time for your indulgence.

 Initially, there seems to be a lot of interest in the “back end” or Yield-spread premium (YSP) compensation, the government holding their opinion, and those of us who believe we should be “comped” for selling a product.  The former believe the rest of us are inherently dishonest in disclosing this detail or substandard in our interpretation of it to our borrowers.  Although we as loan officers and mortgage brokers must disclose this lender payment to the borrower on the GFE and HUD-1, apparently similar income that goes to lenders isn’t disclosed to the borrower. This actually is a side –affect of new guidelines in RESPA. Therefore, I believe it can be implied, that incidences of this information being “muzzled” would be more likely in transactions where brokers are not involved.

 The new Regulation Z rules would prohibit “back end” or yield spread payments to loan brokers and LOs based on either terms or conditions of the loan product.  Obviously, steering a borrower into a loan that is not in their best interest to increase our payday is now being codified into the legislation.

These new proposals to the TILA could affect mortgage lending adversely, decreasing the efficacy of small independent mortgage brokers.  Subsequently, the resultant loss of these brokers would lessen competition, limit consumer choice, and increase costs for lenders and borrowers.