Mortgage Myth Busters: My new title will be Non-Profit rep - Thanks to the Dodd-Frank Act

My new title will be Non-Profit rep - Thanks to the Dodd-Frank Act

big government vs little guy


It's bad enough that some loan officers, aka MLO (mortgage loan originator), make less than what they should on a borrower for several reasons.

Examples :

1.) If I spend countless days and hours helping someone work on their credit instead of them going to a credit repair person that could charge from $500 to $1,000. And just by helping them, this is already included in my total pricing, and is just another part of my service to my borrower's.

2.) Or if some issues come up to where the borrower doesn't have some of the money for closing now and or has to pay off something, I will dip into my profit margin to make the deal work.

Where am I going with all of this? It's about the big guy, aka the government, pushing out the small guy who wants to help out the consumer. Can we say conspiracy, that the big banks might have a hand in this? Possibly, but that is not my argument here.



Janet Guilbault wrote this excellent post :

You, Me, and the YSP: Dirty Rotten Kickback or A Borrower's Best Friend?

This post couldn't be more spot on and you need to read her post before you continue on with mine, to get the best understanding of what I am about to talk about. In the cliff notes version, Janet talks about the Dodd-Frank act that will abolish YSP, which is yield spread premium. Truly understand what YSP is and what it can be used for, before you state that it's just another way for lenders and or loan officers to make more money. From wikipedia - Yield Spred Premium


Janet mentioned a few things on how taking away the YSP could hurt the consumer. The biggest ingredient/issue? More cash required to close for the borrower. My other complaint is that it could hurt those buying properties of $100,000 or less or those that are strapped for closing costs to begin with. Before I continue, I don't want the debate about people needing more money to buy or more skin in the game. I have written about this and that is another subject.. so thanks


Let's break down a few scenarios.... Scenario #1, the total profit margin is $4,500, for both the company and the loan officer combined. Scenario #2 is $4,400. In both scenarios, I am not including the cash needed for the down payment. Assume that the down payment is already covered.


Scenario #1

yield spread premium example

So as we can see, you have $500 left over. Sorry, but I am a firm believer that cash is king and that you should have a few months reserves, if not, more. So what does having $500 do for you when buying a new home? I wrote this series comparing different down payments, mortgage programs, and how to utilize your cash.



Scenario #2

yield spread premium example

In this scenario, the borrower is now going to be short $1,400. I am not talking about getting seller help or gift funds, etc, etc. Each borrower is different and each seller is different. KISS


Key points : It's hard enough to save for a lot of cash. And even if you save a lot of cash, why should you be forced to put it all into the purchase of a new home. I truly believe that less skin in the game is better, just so you can have more reserves for emergencies.  PS : to those that scream more skin in the game. FHA loans and VA loans were doing pretty well until the last 3 years. Gee, not only are people foreclosing on FHA and VA loans, but those that did put 10% to 20% down on conventional loans. Just think about this before you scream "more skin in the game needed."  Think about unemployment, job losses, divorcees, and deaths in the family; that could be some of the major causes for the high foreclosure rates.


Conclusion : What about the fact that many buyers could be affected by this new act. What about the MLO, mortgage loan originator, who wouldn't take the time on someone buying a $100,000 or $80,000 house because the profit margin will be reduced. What about those deals that take a lot of work, a lot of elbow grease, but that I might not make more than $1,000. To some, $1,000 might seem like a lot of money per deal. But not if you know what goes into many of these deals. And what does that say for my expertise and knowledge? How much is that worth? Would a doctor or lawyer spend years of extended education and higher expenses, just to make little to nothing when it's all said and done? What about athletes? Don't they have a rare talent and get paid for it? (don't get me started, I think some salaries are just ridiculous - just trying to make a point)

What does it do when you have a loan officer that gets in over their head, realizing that it will be a lot of work to close that deal, but now drops the ball and the deal doesn't close now. People, it happens now. Wait until this new act goes into effect.




It's never to late to let those on Capital Hill know what this could do to the real estate market and industry. Let's get Janet's post and my post out to the public, to our congressmen and women, and get more people involved.


You, Me, and the YSP: Dirty Rotten Kickback or A Borrower's Best Friend?  By : Janet Guilbault


Examples of eliminating Yield Spread Premium - Thanks to the Dodd-Frank Act     By : Jeff belonger





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Copyright © 2011 by Jeff Belonger of Infinity Home Mortgage Company, Inc

Comment balloon 48 commentsJeff Belonger • February 11 2011 02:13PM


Loan Officers came to our Century 21 sales meeting this week to let Agents know about changes in lender requirements etc.  This topic was also brought up and none of the agents knew about it!

Posted by Marilyn Boudreaux, Lake Charles LA Century 21 Realtor (Marilyn Boudreaux, Century 21 Bono Realty) almost 10 years ago

I commented on the original post as well.  They don't get it.  They don't get how the first time homebuyer will get screwed.  Who will get screwed the most.....the low income.  No one other than Wal-Mart Mortgage will work with these folks.  They just don't get it.

Posted by Larry Bettag, Vice-President of National Production (Cherry Creek Mortgage Illinois Residential Mortgage License LMB #0005759 Cherry Creek Mortgage NMLS #: 3001) almost 10 years ago


This is just makes my blood boil.  It's more smoke and mirrors to try and look like it's protecting the consumer but will end up costing them more money in the end.  Who will be left in our industry?  I'm still waiting for our "new compensation" rollout meeting next week to decide if it's worth it to continue in this industry.  Anything they have done has just royally screwed things up.  It's pitiful.

Posted by Colleen Craig, The Mortgage Ninja (Southern California Mortgage Professional) almost 10 years ago


MARILYN.... . I think even real estate agents need to know about this,... because it will hurt loan officer's pockets, pushing more good loan officers out and leaving average and inexperienced loan officers with the large banks that work for call centers.. which can hurt agents pockets.. or delay closings.. and most of all, hurt the buyer. thanks

LARRY... . yes, I read your comment and I love the 'Wal-Mart Mortgage' analogy. It just will hurt so many more... I guess time will tell. How is your company doing with being a spokes person for our industry? I know you said that you all are working closely with some people on Capital hill.. thanks


COLLEEN... . yes, it boils my blood also.. just like when the new good faith estimate was changed and it was to protect the consumer. Sure, it made it easy to read and understand, but protect? Bottom line numbers are protection, at least not in my opinion. I wrote about it here... New Good Faith Estimate - Good or Bad -

Overall... I already have an idea from our company and it sounds good and fair. But still, that's not the issue here, but the gov't just implementing such policies because it sounds good in theory, but not on paper. thanks for your input.


Posted by Jeff Belonger, The FHA Expert - FHA Loans - FHA mortgages - USDA loans - VA Loans ( Social Media - Infinity Home Mortgage Company, Inc) almost 10 years ago


You'll survive, but your ability to help people will be severely restricted!

The Dodd-Frank Act does to the consumer what Frank does to his "mate" with out the lubricant.

We are being returned to the pre '70's, when your "local bank" could help you, but your chance of finding a "local bank" are about the same as finding a wild buffalo.



Posted by William J. Archambault, Jr. (The Real Estate Investment Institute ) almost 10 years ago


BILL... what an excellent comment and I wish AR had a like button... great analogy and thanks for chiming in,....


Posted by Jeff Belonger, The FHA Expert - FHA Loans - FHA mortgages - USDA loans - VA Loans ( Social Media - Infinity Home Mortgage Company, Inc) almost 10 years ago


All with good intentions (blah, blah, blah) but again who will suffer?  Just the people they were trying to protect.

Posted by Mark Nehs (Mortgage Loan Officer Waukesha Wisconsin) almost 10 years ago

I am still "cracking up" about Bill (comment #5).  Seriously though, these types of things need to be exposed for what they really are.  A rip-off to the consumer.

Posted by Paula McDonald, Ph.D., Granbury, TX 936-203-0279 (Beam & Branch Realty) almost 10 years ago


MARK... . yea, good intentions, when some of this should have been looked at a decade ago. Why now?  They have nothing else to do or who to blame.. and want to look good in front of the publics eye.

PAULA... . yes, Bill's comment was good on many different levels, even with humor.  Not sure if you could call it a rip-off to the consumer, because the gov't doesn't make money on this... just my opinion. But it will hurt everyone nvolved, especially the buyer and one who has little cash.


Posted by Jeff Belonger, The FHA Expert - FHA Loans - FHA mortgages - USDA loans - VA Loans ( Social Media - Infinity Home Mortgage Company, Inc) almost 10 years ago

Jeff, thank you so much for the mention and also for this informative post. Putting a real example out there as you have done here really brings home the issue (of how much this will cost borrowers in terms of options)

In an era when the housing market needs all the help it can get, we do not need to scream about skin in the game.'

We need to scream about GETTING SKINNED. Because that is what is happening here.

Posted by Janet Guilbault, San Francisco Bay Area Direct Mortgage Lender (Platinum Home Mortgage Company) almost 10 years ago


JANET... .  it was my pleasure.. you did an excellent job at bringing a critical issue to the forefront and that it was easily explained. And the focus needs to be on how this will hurt the consumer, not help. And I loved your last sentence.. lol  Thanks for your input.

MARK... .  lol.. don't get me started there. Just look at the two big names involved and their follwers. Some of these are the same people that forced Fannie Mae in 1999 to make home ownership more affordable, when they came out with 100% financing and with debt-to-income ratios of 55%. What were they thinking?  All based on great credit scores?  Yet no or little reserves? Doesn't a scenario like that tell you that the borrower is already over-spent per se.  And yes, I have an issue with the new good faith estimate and wrote about it here... : Good Faith Estimate -  And I could agree more with your two cents. It's getting worse and not better. thanks


Posted by Jeff Belonger, The FHA Expert - FHA Loans - FHA mortgages - USDA loans - VA Loans ( Social Media - Infinity Home Mortgage Company, Inc) almost 10 years ago

Good post and summary of Janet's. I suggested it.

Yes, I suspect things will change again, as you said look at who is behind it.


Posted by Missy Caulk, Savvy Realtor - Ann Arbor Real Estate (Missy Caulk TEAM) almost 10 years ago
Contrary to what some people have said, I think the good, creative loan officers will find a way to continue their practice.
Posted by Eric Peltier, Mortgage Lender in Boulder CO (Eric Peltier - Premier Mortgage Group - Boulder Colorado) almost 10 years ago

And what about the MLO actually telling the poor buyer that s/he could actually get a lower rate if the MLO wasn't getting a YSP? And what about if the buyer knew s/he actually qualifed for 5% instead of 5.750 or 6.25% because the MLO was getting a YSP.  How about the poor buyer could have kept more money in his/her pocket per month, had he/she known that their MLO has jacked up the interest?  How about letting the poor buyer make that choice? 

Posted by Charita Cadenhead, Serving Jefferson and Shelby Counties (Alabama) (eXp Realty) almost 10 years ago

Wouldn't it be nice if someone who actually understands the mortgage business worked on Capital Hill and had a say in some of this?  You know where I'm going with this, right?

Posted by Margaret Woda, Maryland Real Estate & Military Relocation (Long & Foster Real Estate, Inc.) almost 10 years ago


MISSY... . I know change is suppose to be good, but how can one be positive about this change. And thanks for the kind words and for suggesting this.

PREMIER Mortgage ... . how is a good creative loan officer going to find a way when their hand is tied behind their back? Seriously, do you have any ideas? Don't you need to make a profit?  Will it now be reduced?  Or will you just have to charge more upfront?

CHARITA.... . To sum up your questions with one answer, that buyer will not get the chance now. Rates will yield some pricing difference, but without a YSP, how can one pay of the higher costs?  I think the problem here is you are assuming that all of us loan officers jacked up the rate to make more money. As I stated in my post, I have a set profit margin for each buyer, and so does my company. With that said, many buyers will suffer now. Either get worse service, or that many types of loans can't be done now. I forgot to add one very import example... on a conventional loan with a credit score of 620 and 20% down, it will cost the buyer 3pts..  so how will they get the extra 3 pts besides what a company needs to charge to make their profit?  Overall.. again, there were some that charged more off the YSP and kept it... but I would say that was less than 30% prior to 2008. Many of those people are gone now... buyers overall will need more money to buy and won't have much of a choice. That will just be a fact. thanks for your feedback.

MARGARET... ,. yes I do and yes I do... but we need to get those people into Capital Hill. Or at least have experts up there that would consult. I am sure they have some, but you wonder whose pockets they are in.


Posted by Jeff Belonger, The FHA Expert - FHA Loans - FHA mortgages - USDA loans - VA Loans ( Social Media - Infinity Home Mortgage Company, Inc) almost 10 years ago

Jeff I am sure that you do and rightly so.  Know that my questions don't apply across the board.  But I'll repeat my comment on Janet's original post:  When I first got my real estate license I started working with a mortgage broker also.  As a matter of fact, I tried 2 or 3 companies.  Want to know why I didn't last long:  the YSP!  Now maybe it's ironic that THREE (3) companies used the YSP as their personal savings accounts and want held to a "don't ask, don't tell" mentality, but I couldn't do it.  There was nothing right about it as far as I could see.  Maybe I picked the wrong 3 companies, but the YSP left a really bad taste in my mouth.  My comments apply to who they apply to and I'm sure that is not you.

Posted by Charita Cadenhead, Serving Jefferson and Shelby Counties (Alabama) (eXp Realty) almost 10 years ago

Jeff, forgive me if I'm missing something here, but in both examples you are showing half of the amount of cash to close in No YSP allowed columns.  Shouldn't that number be the same on both sides to compare apples to apples, leaving $5500 left over in Scenario 1 and $1600 left over in Scenario 2.  This is still less favorable for the borrower than the current situation and the new compensation rules will definitely leave borrowers with fewer choices for their financing.

Posted by Bill Rozek, NMLS #214260 (Embrace Home Loans, Inc.) almost 10 years ago

Charita #15.  I agree with you.  I did loans for a short period about 8 years ago in the hot times, and I can't tell you the number of times I heard MLO's (or whatever you call mortgage brokers these days) laugh as they were charging people 3 points up front and getting 3 in the back (as YSP) and saying the buyer would never know about the ysp. At least now it has to be disclosed.

Jeff, I don't get where it will cost the consumer more. I think I'm missing something. I just did a loan directly with a local credit union and the closing costs were very cheap. The rep was on salary and small bonus and it was the best loan in recent memory. Also, there is a bank online where some of my clients have gone that only offer 3,5,7 adjustables (I won't mention their name) but they're fees are super low. So, maybe someone can explain it to me, but where is the consumer being hurt?

Jeff, unfortunately the mortgage broker business is being hurt by the same problem as Realtors. Too easy a barrier for entry, so the bad element came in and ruined it for everyone. You are now paying for the damage done by the 3 point scammers.

Posted by Andrew Martin (REMAX Accord) almost 10 years ago

Jeff, great post.  Thank you for this.  The more this information gets out there the better for all.

Posted by Bob Hirsch (The AVD Group) almost 10 years ago


CHARITA... . point well taken, because I use to drink with those same people sometimes. The same people that would laugh and say... "ha, I am adding a point today and raising their rate for a closing that will take place in 2 days." I get your point and truly understand that there are people that will keep the profit. How about those loans that paid back 4 YSP?  For those loans that were called pay option arms. I did one once and gave back $5,500 to the buyers closing costs. She had talked to 4 other people and I was the only one using part of my YSP to pay back some of their closing costs.

Regarding the 3 brokers that you worked for.. can't tell you because I don't know how they operated. But let me try and explain this better. Bad taste or not, there are times when I keep a good part of the YSP for myself, that is if I am charging no points. If I gave up the YSP also, with no points, I don't make a dime. I don't care who you talk to or who you go to, there is no other way to make a profit then unless you charge $4,000 in lender fees or points. That is my main point. Let's forget about those crooks. That's why the borrower gets to shop. If they shopped properly, then YSP wouldn't be an issue. But the fact is that if you take YSP away, in many cases, it will cost the borrower more money, if I have nothing else to fall back on as profit, especially if I am charging zero points.

And before I go, how do you think no cost loans are done?  With a rate that pays back a YSP and gives back a SRP. Without the two of those, you can't get away without paying points, lender fees, and title insurance. Just food for thought...


Posted by Jeff Belonger, The FHA Expert - FHA Loans - FHA mortgages - USDA loans - VA Loans ( Social Media - Infinity Home Mortgage Company, Inc) almost 10 years ago

Jeff: I figured you'd been working this way for some time now. Lol! Seriously, I think we'll be paid on production just like a bank pays its loan officers. Get ready to become a high producing machine. I agree with you. It will now cost the consumer more to borrow money. I doubt if this what our good senators intended! Thanks for the post.

Posted by Paul McFadden, Pest Control, Seattle, WA. (Responsive Pest Control) almost 10 years ago


BILL... comment # 19... no, you aren't missing anything. You can look at it two ways. I wanted to show the example for those that didn't have as much money to use. Even if everyone was on the same playing field with the same cash, in my examples, you are still using more money, leaving less for reserves. I would rather pay the little higher monthly mortgage payment to keep more cash in my pocket.  Now, that is if I didn't have much to work with. We are talking about the average buyer. Not someone that has $40,000 in cash. But as we both agree, this decision will be less favorable for all buyers and will leave them with fewer choices. thanks


ANDREW... . we have all heard those same loan officers, the greedy ones. Do you want to know how many times I made very little because I had to give back to the borrower, to help make a deal work, because they either didn't save properly, or because another expense to the buyer came up?  It happens... and if we can't use a slightly higher rate to offset this at times, then what? The buyer can't buy.  Not everyone got 3 pts upfront and 3 pts on the back. And to be honest with you, look at example #2. On a small loan amount, if I don't get some points upfront and on the back, that loan might not get done.

I am not missing anything...  I talked to many very good loan officers from around the country that I trust, that are ethical, and they say this will hurt.. they get it. Sorry, but your short time in doing mortgages 8 years ago don't matter.  Why?  Times have changed.  There were larger spreads on interest rates and mortgage programs 8 yrs ago. The Pay Option Arm is one ecellent example, that was abused and lied about.. and loan officers misled consumers on this. Please read my comment to Charita. The local credit union rep or the big bank that has their employee on a small salary with a bonus... You might have had a good transaction with them. But I will say this from my 18 yrs, it won't always be like that. I have a friend whose client went to a VA credit union, that specialized in VA loans. It was a mess.... And the rep had no clue on some basic issues. There is a phrase often used.. you get what you pay for. The big banks will like this because of the business model with call centers... and you think it takes long now to do loans?  And that some screw things up, because they have no clue, yet they get tones of loans coming in, because it's a large call center for a large bank. Yet, do you think they will care if they get 20 loans in a month and 5 fall out, because they were taking the easy ones. My point?  The harder loans will fall by the waste side. Do you know that most of my pipeline last year were tough loans with tough buyers... because people either know I will get them done, or that I picked up the pieces after the fact. In 2008, I closed 16 loans that were denied by other lenders... and it wasn't like I committed fraud to getting them done. It was based on knowledge. I could be here forever... but yes, we all are paying the price. And more better loan officers will leave the business. The average ones will stay and you will have more closing issues. If you don't see it, then you have been lucky. But ask around nationally. My complain e-mails have gone up in the last 12 months. I see and hear more now than ever before... and this is after those that passed the licensing requirements. thanks for your input.


BOB... . comment # 21.. . my pleasure and I hope so.. I hope those on Capital Hill read this, and understand it from those of us in the trenches. thanks for the compliment.


Posted by Jeff Belonger, The FHA Expert - FHA Loans - FHA mortgages - USDA loans - VA Loans ( Social Media - Infinity Home Mortgage Company, Inc) almost 10 years ago

Thanks for hearing me out Jeff and I heard you as well. Appreciate it.

Posted by Charita Cadenhead, Serving Jefferson and Shelby Counties (Alabama) (eXp Realty) almost 10 years ago

Thanks for your reply, Jeff, I understand now what you were trying to show.  Being on the mortgage side of things, like you, I'm numbers guy.

Posted by Bill Rozek, NMLS #214260 (Embrace Home Loans, Inc.) almost 10 years ago

Jeff,  as I think you even pointed out, if a buyer has to come up with a little extra money because of an unexpected expense and they have to rely on you because they don't have the money, maybe they shouldn't buy.

Unfortunately the damage by the scammers has already been done, and now the good and bad mortgage brokers may have to start practicing the following,  "would you like fries with that?"

Hopefully you saved up a lot of money from the good times and realize that the government is not on the side of people making a living. Were going to regulate the honest people out of business.

Posted by Andrew Martin (REMAX Accord) almost 10 years ago

Charita, you wrote this:

And what about the MLO actually telling the poor buyer that s/he could actually get a lower rate if the MLO wasn't getting a YSP?

If profit is not included in buying a toaster, then the toaster would be cheaper. Should we tell someone who buys a toaster that if they buy it at wholesale or buy it MINUS any proft to the seller, then TOASTER WOULD BE CHEAPER?

 And what about if the buyer knew s/he actually qualifed for 5% instead of 5.750 or 6.25% because the MLO was getting a YSP. 

I advocate a giving all borrowers a choice of either paying points, or having a higher rate. That way they can make their own choice. Borrowers qualify for a payment, by the way, not a rate. Clearly if a borrower was stretching to qualify for the payment, the loan officer would recommend the lower rate with the points being paid. That way the payment is lower. ( and for the record, I do not recommend anyone stretching to make a payment, anyway)

 How about the poor buyer could have kept more money in his/her pocket per month, had he/she known that their MLO has jacked up the interest?  How about letting the poor buyer make that choice? 

The money they save per month if there was no YSP would have already been spent because if there is not YSP, the buyer paid points with his cash at closing.

I am also offended at your use of the term "jacking up" the interest. Profit is not evil, it is how the world turns. You do not "jack up the price of the toaster". You add the profit with the goal of making the pricing competitive so it will sell. That is how it it works when you sell money as well.

Posted by Janet Guilbault, San Francisco Bay Area Direct Mortgage Lender (Platinum Home Mortgage Company) almost 10 years ago


PAUL... .well, not to give any secrets away, but something like that. Our company has some ideas on this. But the bottom line, it will still hurt the consumer and Big Brother needs to stick with what they know. If anything, the writing was on the wall over a decade ago, yet they did nothing about it. Everyone, and I mean everyone, were filling their pockets. Those that could have curbed some of these issues back then. Instead of working on part of it, they now are chopping the tree down at the bottom... thanks

CHARITA.... . no worries and thank you. I'll be honest, you came at me like a semi, a large truck.  lol  And yes, at first I was like.. damn and my blood boiled. But I didn't want my comment to come out as an attacking comment, because you just meant well... that you had many concerns and some of them because of what you knew from when you were in the business. But I do need to ask, when was that. I bring that up for a reason. But overall... you brought up some good points. But I will reach back and say, there is always a bad apple in the bunch. And maybe you just worked for 3 bad apples. Because I knew of two local bankers that had sweat shops, that had their loan officers charge more than what should have been charged. There are so many examples, that we could be here for weeks. Anyhow, thanks for coming back and for adding to the conversation. I like that and appreciate that. thanks

BILL... . I have always been a numbers guy, ever since I got in the business back in 1992. You know how pathetic of a numbers guy I am? When I first got into the business, selling fixed rates and arms, to compare the principal balances after each year for the first 5 yrs, I use to write each month out... not in a program. I wasn't much of a computer person to understand how to do spreadsheets and such... but I learned a lot of things back then because it was by hand, not by computer or from a program. thanks for understanding what I was trying to say.


ANDREW... .  I don't buy into that little extra money and shouldn't buy. Why?  I have been doing FHA loans since 1993 and even VA loans. And even USDA loans... many of the buyers that went into foreclosure or have had delinquencies the most?  Those from 2006 to now. Losing jobs or less income. These same loans did just as well a while back, even when people had less money. Just my opinion... but you kind of help make my point. Okay.. so it's going to cost more and that buyer will need more or use up the rest of the money that they had... now they still have no reserves, but can buy a house.  Not sure if you follow my outside blog.. but I write a lot of educational stuff, trying to get the buyer to understand. When is it a good time to buy a home?  and  How much of a mortgage can I afford?  and lastly..  Cash is King - Comparing mortgage programs and how to use your money wisely.

But yes, the damage has been done by the scammers... and they will never go away.. even with the new licensing requirements.. I still see it in advertising... even by a very large company that one realtor recommended online.. great looking interest rate of 4.5%, but the APR was 5%. That is spending a lot of money for a lower rate, because yes, some people still shop rate and don't understand anything else. Just as those that past their tests... I am getting more complaint e-mails in the last 3 months than I did all of last year. More deals dying last minute... bad or misleading information given to many. The tests didn't test your mortgage knowledge... only about 10% of the tests did...

Overall.. the gov't is over-regulating when they could have done some of this years ago. Misleading advertising has been going on since I noticed it in 1992... just up until last year did they jump on this... after the shit hit the fan. You can't tell me that regulators didn't know?  Anyhoo.. I could be here for another 30 minutes just on that subject. thanks for coming back and for more input.


Posted by Jeff Belonger, The FHA Expert - FHA Loans - FHA mortgages - USDA loans - VA Loans ( Social Media - Infinity Home Mortgage Company, Inc) almost 10 years ago


JANET...comment #28.. . thanks for chiming in. Your last paragraph says it all about, about being competitive. I understand Charita's issues... but she makes them to be like it's evil and that everyone did it. Maybe she was taught wrong on how the system worked for the short months that she did mortgages. I say this because I have hired loan officers in the past that thought pricing worked one way and only one way. Some companies preached different methods of selling. But wait, what about those CEOs that got very high bonuses, but who played with the numbers, making things look better.. or whose companies got gov't handouts, but bonuses were still being paid out. Sorry, but the gov't needs to start with them and not us little people. We can partially see that the big banks are trying to control some of this through the gov't, because they will be the winners based on what Bill stated... those that pay small salaries and bonuses. But some of us will know what will happen with that model... Loans will take longer... more will fall apart at closing... and more buyers won't get help on the difficult loans upfront.  thanks for saying some of what I wanted to say, but couldn't find the words.


Posted by Jeff Belonger, The FHA Expert - FHA Loans - FHA mortgages - USDA loans - VA Loans ( Social Media - Infinity Home Mortgage Company, Inc) almost 10 years ago

Andrew comment # 20 you wrote this:


 I heard MLO's (or whatever you call mortgage brokers these days) laugh as they were charging people 3 points up front and getting 3 in the back (as YSP) and saying the buyer would never know about the ysp

I guess it isn't nearly as funny when a real estate agent charges 3 points (for selling office) and 3 points (for listing office) to sell a house? Oh, but your point was that we didn't DISCLOSE those points paid via YSP? (sorry, I thought you were making a comment about the amount of points being charged)

Did you disclose to your buyer that the house cost 3% MORE because YOU (selling agent),  need to get paid? Nope, that's because you didn't need to sell your services at all (the way we do), since the entire fee is charged to the seller. Makes it easier to get buyers when your services appear to be "free" and you don't need to "sell" them on the idea that your services cost $15,000 (3% on a $500,000 house)

 Please be careful pointing fingers. The world would be a very different place if real estate buyers had to pay directly for the services of their real estate agent. You might have a little more sympathy for those of us who must sell the rate + all of the closing costs directly to the buyer.

Posted by Janet Guilbault, San Francisco Bay Area Direct Mortgage Lender (Platinum Home Mortgage Company) almost 10 years ago


I have to add one more part to my whole thinking... after sitting back and reading comments from both sides.

I even mentioned this in my post above... I have a profit margin and so does my company. Sure, I don't hit this number all the time, but my company needs to usually hit this, because of costs. But overall... the end result is that there needs to be profit... no matter if you get it from the borrower upfront or from the interest rate. YSP is not evil, but those loan officers that abused the system. Janet makes a few good points regarding profit and such. thanks  ps.. we could compare this to so many things... how does a financial consultant/advisor working for a company that sells stocks and bonds get paid?  hhhhmmmm... it's built into the pricing.


Posted by Jeff Belonger, The FHA Expert - FHA Loans - FHA mortgages - USDA loans - VA Loans ( Social Media - Infinity Home Mortgage Company, Inc) almost 10 years ago

Understanding YSP is really easy.

Wholesale Rate (par rate) Plus YSP = Retail Rate.

If there is no YSP, then the borrower must pay all of the profit margin that Jeff is talking about in points.  Remember YSP is nothing more than a fancy way to say profit margin.  Depending on the borrower's situation, it may or may not be financially prudent to do a loan at par rates for the buyer.  

For example.

$400k loan at 5% with no points gives a payment of $2147.  YSP of 1% is baked in...

$400k loan at 4.75% with 1 point gives a payment of$2086.  No YSP on the loan... but you have to pay $4000 in origination fees at closing.

There is a $61/month difference in payment.  Do want to pay $4000 at closing to save $61/month????  $4000 divided by $61 = 65 months.  It will take you more than FIVE YEARS before you start saving any money.  This doesn't even factor in the odds of refinancing or moving. In fact, paying points in this situation in a way is like putting a defacto prepayment penalty on the loan for five years.  If this person refinances or moves prior to five year, they pissed away $4000 dollars.

For those of you who think community banks and the Too Big To Fail banks are offering cheap loans with no YSP, you need to wake up and smell the coffee.  Banks earn Service Release Premiums which are not disclosed in anyway.  It is technically the same as a YSP.

These new rules and regulations are just going to raise costs for consumers across the board.  Right now, LOs have the ability to negotiate with borrowers, cut costs when necessary, give credits, and incentives to work on much harder deals.  All of that is going to go away. 

For the Realtors who keep saying YSP is jacking up the rate or insinuating that it isn't earned.  Let me ask a simple question.  How many Realtors do you know who got 4 offers on a house two days after it was listed?  The house sells and closes and the Realtor conservatively gets 2.5% on a $500,000 home.  How is that not robbing home sellers??   $12,500 in commission on a house that basically sells itself in two days???  All they did was put a sign in the front yard...    Just know, the Feds are coming after you guys next.

Posted by Russ Msrtin, Residential Mortgage Advisor (Perl Mortgage) almost 10 years ago

Jeff, great points and re-blog, as it seems it is getting tougher and tougher to make a buck...

Posted by Gary Woltal, Assoc. Broker Realtor SFR Dallas Ft. Worth (Keller Williams Realty) almost 10 years ago

Janet #31, my ONLY point was that too many brokers were scamming the "poor" people and now everyone is paying for it with further regulations.

I actually got out of the mortgage business because I was selling Real Estate also and I don't believe you can do both well at the same time. But, I also felt weird about giving someone a higher rate so I could be paid, then if they just went to their local bank, credit union, etc. etc. And it also bothered me when I heard people laughing about ripping off the poor people with higher rates, extra points etc.

Seriously, I do have sympathy for those in the business still. Appraisals are a bitch now, YSP is going away, clients want all of your money in rebates, etc.

But, at the same time, I have to compete for my salary everyday against discount agents and companies like Redfin that will give 33% of the commission back to the buyer. I have to fight for my business everyday also.

Again, my ONLY point was that too many regulations will kill all business. The mortgage business is first, but I wouldn't be shocked if they start limiting an agents pay also, because as you pointed out, the buyer really is paying some of it in a higher house price.

Jeff is one of the good guys that will figure it out and still earn his clients respect.

Posted by Andrew Martin (REMAX Accord) almost 10 years ago


 Great descriptive article. You know you should probably expect some more problems coming in the next few years. Someone has figured out that a little guy has agood deal and they do donate to the campaign fund.  I am a firm believer that the govt will certainly find a way to make it harder for everyone.  Some one has to pay for the greedy bankers bonuses and wont be the ones that should more than likely...(Every once in a while I have a glimmer of hope here in DC:) 

     Now rightfully so, the boom years were ridiculous and you really should have better quals than breathing to buy a home..   Responsibility is what it is all about and as a govt and society we forgot that. 

  Now I found your charts quite superior, clearly detailed and certainly displayed the yields to everyone.

Now I also believe that buyers agents should beware.. Someone stated something about rebates and I agree totally and thats why I would rather do a rental than work with low end buyers.. Rebates, baby, why do you need to make that whopping $8,000 on a low end townhome here in Northern Virginia?  You only showed me 35 houses in seven dam cities:))    Oh, who cares if you have to pay your taxes or your broker..  

Carry on shipmates. If we are going down, we are all going together. 

Have a great day!

"We REALLY do appreciate all your referrals"

Joseph Holbrook
HPE Properties @ Keller Williams Realty Reston


Posted by Joseph Holbrook, CDPE(Dulles Area 703-651-9169) (Keller Williams Realty ) almost 10 years ago

Yay! It worked, good discussion here.

Posted by Missy Caulk, Savvy Realtor - Ann Arbor Real Estate (Missy Caulk TEAM) almost 10 years ago

In your pro-fromas, why is the "cash on hand to close" exactly doubled for the w/YSP vs non-YSP?  

Posted by Nick Dailey, RE/MAX: Northern Kentucky Real Estate - NKY MLS - Short Sale (RE/MAX Affiliates) almost 10 years ago


With the banking lobbyist clout they have shielded the YSP disclosures to the borrowers. Why is it when you go to your bank the Mortgage rate quote is typically ,25% to .5% higher then a broker? If you can get a Initial fee worksheet from the bank you do not even see a YSP on it. Who is really being protected Banks or borrowers?

Posted by Kenny Salame, NMLS ID 313873 (All Western Mortgage Broker # 14210) almost 10 years ago


These types of posts are why I read AR. I love this, great information and civil discussion!


Posted by Brent Wells, Real Estate Broker serving all of North DFW (The LivingWell Team) almost 10 years ago

Great discusssion but comments about how realtors make money coming from a a mortgage broker is not conducive to the discussion.  If realtors and mortgage professionals start taking pot shots at how we each earn our living as if one is better than the other does not help present a professional image.

The banks want mortgage brokers to go away so they can have the whole pie.  I, also did loan origination and understand the YSP better than the average agent - everything has a cost.  Just because the banks don't charge it does not believe you are getting a better deal.  My experience has to do with the individuals involved instead of the institutions.  Experience people will make money whether via volume or another incentive plan.

Banks will start losing based on their lack of customer service and ability to perform.  When the time to get a major bank mortgage takes 60 days with constant mistakes people will learn not to use the bad performing banks.  Same when a realtor does not keep their buyers or sellers informed during a transaction, does not return phone calls, etc.  They will lose business.

Eventually, other players will come into the market if they can find a way to make money.  It's the American way.  Yes, unfortunately, government intervention even though well meaning may have the opposite effect.  NAR and the Mortgage Brokers Association should have teamed up to get a better system in place instead now we have just narrowed the choices for consumers.

Realtors and mortgage brokers and banks still need each other to complete the home buying process. So, let's respect each other and understand the other person's viewpoint before making rash statements.

Posted by Evelyn Santiago, Managing Broker Heart Realty Group, Inc., Passionate About Real Estate & Our Clients! (Heart Realty Group, Inc..) almost 10 years ago

"The Dodd-Frank Act does to the consumer what Frank does to his "mate" with out the lubricant."

I heart Bill.

Posted by Jason Sardi, Your Agent for Life (Auto & Home & Life Insurance throughout North Carolina) almost 10 years ago

Hi Jeff,

Nice article, Very Good Points.

Its like the GFE, The change was going to make it eazier for consumer to understand costs: Right

Who the hell created the APR calculation? that no consumer understands: Right

YSP,Points,backside,origination fees, underwriting fees, processing fees, broker fees:Right

It looks like most Wholesale Lenders in the Midwest are going to pay a flat 2 points, You will be able to buy up and down the rate and use the funds to pay costs,but no override: Right

Jeff, I have originated loans for 25 years and I have now witnessed a full circle,  The more things change the more they stay the same.

As Billy Joel said: Only the good Die Young, The best will weather this one toooooooooooo!!!!!!!!!!

Posted by Thomas Tom Carpenter (VanDyk Mortgage Corporation) almost 10 years ago


JANET... comment # 31... . as you and I know, this was a select number of loan officers and some of them are still in the business. I guess what is truly misunderstood about YSP is that you can't see it as one could see a television when buying one. We know a profit margin has to be built into the sales price. That the tv had to pass hands... and people accept this. With YSP... people and some realtors think that we should just hand over the difference, that we will still get paid.. and that is absolutely false. I don't care what credit unions do... if they were the best, wouldn't everyone be going to Credit Unions? Most Credit Unions act as a big bank also.. and they aren't really cheaper and get the money from the same place, unless they want to portfolio their own stuff... bank it themselves. Besides,.. sorry, but many that work at a credit union only know vanilla stuff, don't have a place or know how to tackle the hard loans. It's a fact.  thanks for coming back and adding to this discussion.

RUSS... . very good.. someone not only understands this, but read what I wrote. Yes, basically if you don't have YSP, you will now need to pay for the pricing up front and my profit margin. And you bring up SRP's, which anyone gets also... but it's the sum of both the SRP and the YSP that allows any lender or bank to offer a different scale of rates. If we talk any or all of that away, as you stated, the buyer will just need more cash to close with. It will be interesting times by the summer time. thanks for your feedback.

GARY... . it will get tougher on some avenues... and thanks for the polite compliment. As far as reblogging, not sure why that feature has been disabled or not working.. thanks

ANDREW...comment # 35. . I guess I will be writing a blog post on brokers and bankers... sadly enough, both sides were scamming the buyer. I knew of mortgage bankers that had sweat shops that were raking buyers over the coals. Most of those people are out of the business now. They didn't take this job seriously and it was easy money at the time. And I am glad that you are only doing one job... sorry for those that do both, but it irks me on how one can think they can do both very well. Maybe if they weren't busy and did 2 buyers a month in real estate and maybe 1 or 2 mortgages... and didn't prospect and anything else. Lastly, you stated this...   "Jeff is one of the good guys that will figure it out and still earn his clients respect."  - lol  yea, but at whose cost?  If this gets worse, I might have to find something else. I think I am to valuable to keep making nickles and dimes for what I do and how I educate others. It might sound conceited and that I have an ego.. but I do know that I work for the consumer and that I try and educate them.  thanks for the kind words...

JOSEPH.... . I hope it doesn't get harder... it's wearing on me.. lol  Seriously though.. I am tired of the CEO bonuses based on bogus performances... and that the gov't needs to back off some. This so-called greed was around from the late 90's to 2006... why didn't they intervene back then?  Because we had no major messes and or issues. Now they jump in with both feet pounding away. They got to harsh in my opinion... thanks for your input and for the compliment.

MISSY... . yes, and thank you.. and yes, good discussion for the most part. thanks for stopping back.

NICK... comment # 38.. . if I understand correctly, why does the left side have more upfront cash than the right side? As I explained to someone above.. I wanted to show that the person who has less cash will be hurt even more. And in some cases, actually need more money. And just for the fact that this can take away from a buyers reserves, which I think are more important... just for emergencies.  thanks and I hope that helps some.


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