How the Loan Officer Compensation Rule Ends the Rate Debate
Posted by: Greg Fischer Post date: April 11th, 2011It became official last week, the largest change in the mortgage industry that you haven’t heard about: ALL loan originators – brokers, mortgage lenders, originators at Big Banks and local credit unions – now have a new compensation plan mandated by the Fed. What this means is that no matter who you talk to about your next home mortgage, they already have a fixed percentage than they will be paid by originating your loan, regardless of rate, regardless of terms, regardless of loan type.
The first thing this means to you is that you will only ever be offered the best rate that you qualify for. There is ZERO incentive for a loan originator to sell you a rate that isn’t the best he has to offer. You can still elect to take a slightly higher rate in order to save money on your closing costs, but not a dollar of that “extra” can be paid to the lender or originator. It’s all your money.
Since all mortgage companies get their money from the same place (ultimately securities sold on Wall St), that should mean that the “best available” rate to you will be very similar from bank to bank. Assuming that most banks can offer you the same rate, now more than ever the primary focus of your mortgage hunt should not be rate, but service and the biggest question of all “Will it close?”
As a mortgage lender and broker, I too have access to dozens of investors, each with slightly different guidelines, all with very similar rates. They are apt to be the same investors that another mortgage lender is using, and they are very likely getting the same pricing. The difference then, is knowing what lender, under what circumstance, given all the elements that make a loan approval is going to get you the money you need for closing.
If you’re buying a house, and most lenders will offer you the same rate, what else is important to you? How else will you choose?
How important is communication, and what are your expectations? How often do you want to be contacted? It it important that your mortgage professional explains what’s happening, or just notifies you of progress?
You will be baring your financial soul to this person. Do you trust them? Not just with the information, but with the handling of your application? Do you know what, why and how things will happen?
Decide on your questions and know the answers to that before you go shopping. Then ask those questions and expect a response. Sure the rate matters, but in a field that has just been leveled, there are still plenty of pot-holes. Be confident that your mortgage professional knows more than how to look up a rate. They need to know how to get you to the closing table.
I do. Ask me.
