Move over direct lenders
. The Consumer Financial Protection Bureau (CFPB) will level the playing field as of August 1st, finally facilitating mortgage shoppers’ ability to do an apples-to-apples comparison of loan origination and settlement charges of direct lenders compared to mortgage brokers.
Here’s how. TRID is the new 4 letter word. It stands for TILA, RESPA Integrated Disclosures.
Four currently required disclosures (initial TIL, final TIL that are supposed to calculate the cost of credit), the Good Faith Estimate (GFE) and the HUD 1 Settlement Statement (HUD 1) are going to get boiled down to 2 forms, the Loan Estimate (LE) and the Closing Disclosure (CD). The LE merges the initial TIL and the GFE. The CD merges the final TIL and the HUD 1.
The new LE ends the confusion, ridding you, the mortgage shopper of having to decipher any indirect compensation (rebate) comparisons from the lender to the mortgage broker whereas lenders were never required to disclose any of their back-end compensation from upstream investors like Fannie Mae and Freddie Mac.
Mark my words. Within 5 years mortgage brokers will once again be the big dogs, originating 75 percent of all home loans.
According to Tom LaMalfa of TSL Consulting, who has spent well over 3 decades studying and researching mortgage markets, the mortgage broker channel was responsible for 67 percent of all loans originated at its 2004 peak, dropping to as low as 8 or 9 percent after the mortgage meltdown. “Access to multiple investors, a stable regulatory environment, more freedom, more money, and more choice will see bank loan officers migrate back to mortgage brokering.”
John Councilman, President of the National Association of Mortgage Professionals (NAMB) proudly points to the CFPB’s own written guidance that concludes in part mortgage brokers “offer important consumer protections” not available to consumers through other channels. “Essentially, it’s an opportunity for consumers to work with a huge part of the marketplace, whether you want to find the lowest rates, the fastest funding or your situation is difficult”, said Councilman.
Even with the current GFE comparison handicapping mortgage brokers that started back in 2010, California mortgage brokers funded almost 46 billion dollars in 2014, according to data provided by Tim Doyle, Senior Vice President at the Conference of State Bank Supervisors.
Not bad! Heck, the national totals for all mortgages funded in 2014 were just 1.1 trillion dollars.
Truth be told. I think CFPB Director Richard Cordray is really a closet mortgage broker. How else do you explain all of this gushy support for mortgage brokers, the “Know Before You Owe” pricing engine on the CFPB website, imploring you to shop around for your loan, explaining the protections that mortgage brokers offer and making the shopping and comparison process fair to you and the mortgage brokerage community?