RETURN TO HOMEYes, this was delayed. Was it due the confusion of it all, the ridiculousness of it all or just plain not ready?
Come April 1st 2011, the mortgage industry will be rocked again. Not only will the compensation plans be changed, to the “unfavor” of most, but the guidance on presentation of mortgage products to clients shall be expanded and strictly adhered to.
To be sure the unsavory type of mortgage loan officer does no wrong by their naive and trusting clients, the Federal Reserve has adapted guidance on presentation of available mortgage products.
The definition blanketed the most is that of “anti- steering”.
The Federal Reserve rule prohibits mortgage loan originators from “steering” a consumer to a particular loan that is not in the borrower’s best interest. The borrower is presented with options for products in which the consumer expresses an interest. The borrower is provided with loan options that include:
1. The lowest interest rate.
2. The lowest dollar amount of points and origination fees.
3. The lowest rate without risky features, such as a prepayment penalty, negative amortization, or a balloon payment in the first seven years.
If a borrower “expresses an interest” in a particular loan product, the three options listed above must all be presented. Thus when discussing loans with potential clients, the mortgage loan officer must determine what the borrower is interested in, determine what will meet the borrowers’ needs and present three options for each.
This is all in the nature of “not confusing” the borrowers. So if the loan officer thinks that the borrower might have a good choice of two products, and the borrower’s cousin Sammy’s dog walker’s brother got this really cool mortgage product and he heard about another loan product on the Suze Orman Show, well then that is four products times three options- equaling twelve scenarios.
The point here is that the idea of making sure the borrower receives all of the best options and a good analysis of each is positive. On the flip side, the regulations have created guidelines for presenting every product available to the client that might be in their best interests and a comparison in three different ways. Again, all very nice, but it might be overkill. In the best interest of transparency, most borrowers might feel this presentation to be overwhelming.
Call me crazy, but that seems confusing to me! I guess it was…….