COMMENTARY by JONATHAN FOXX
Jonathan Foxx, former Chief Compliance Officer of two publicly traded financial institutions, is the President and Managing Director of Lenders Compliance Group.
Lenders Compliance Group is the first full-service, mortgage risk management firm in the country and pioneers in outsourcing solutions in regulatory compliance.
Published in the September 2010 Edition of National Mortgage Professional Magazine.
I have published an article that I think you'll want to read. The article provides the rationale for introducing a new term, which I have named the Compensable Services Fee, to replace the term Yield Spread Premium. The article is written in the form of a Proclamation.
As you may know, I have lectured on and written rather extensively about the Yield Spread Premium, for example:
- A New Era of Mortgage Reform - Part II: Legislation - Reactive or Proactive (September 2010 Edition)
- Landmark Financial Legislation: New Rules for Mortgage Originators -Part I: Reformation and Regulations (August 2010 Edition)
- New RESPA Reform Rule - Overview (January 2010 Edition)
- Service Release Premium vs. Yield Spread Premium: Match or Mismatch? (August 2009 Edition)
- Saving the Yield Spread Premium (July 2009 Edition)
- Yield Spread Premiums: Compensation or Kickback? (June 2009 Edition)
ALL THESE ARTICLES CAN BE FOUND HERE and were published in National Mortgage Professional Magazine, the mortgage industry's leading national magazine.
Now that the Yield Spread Premium (YSP) has gone the way of nature, and a credit has taken its place, perhaps it's time to make sure that the public understands that the credit, in whole or in part, provides payment for goods and services that the mortgage broker has actually rendered.
Or, to be blunt about it: notwithstanding politics and negative publicity, there is no RESPA Section 8 "kickback" when a mortgage broker actually furnishes and provides those goods and services and the compensation is reasonably related to the value of the goods and services actually furnished and provided!
The new Good Faith Estimate, which became effective January 1, 2010, reflects the change from YSP to credit.
But does the mortgage loan applicant actually know what the credit actually pays?
I am pleased to share this article with you. Special thanks to National Mortgage Professional Magazine for the opportunity to publish this Proclamation.
Lenders Compliance Group provides expert guidance in all areas of mortgage compliance.
If you are not yet a client, shouldn't you become one?
We are the first full-service, mortgage risk management firm in the country, and pioneers in outsourcing solutions. It would be a pleasure to support all your regulatory compliance needs.
If you have questions about this matter or would like assistance with mortgage compliance, please contact me at any time.
Because the Yield Spread Premium is effectively gone from disclosure and the credit is to be used to partially or fully pay for the mortgage broker's services, a new term should be used to assure the public of the unique purpose of that credit, with respect to the goods and services actually provided by the mortgage broker.
Consequently, I would like to offer a new term to the industry to help assure the public's positive perception of the critical role played by mortgage brokers.
Behold my PROCLAMATION of a new term:
Compensable Services Fee!
THE NEW TERM
"COMPENSABLE SERVICES FEE"
TO DESCRIBE COMPENSATION
EARNED BY MORTGAGE BROKERS
RESIDENTIAL MORTGAGE LOAN TRANSACTIONS
Please read the PROCLAMATION and pass it around, so that mortgage brokers may explain to loan applicants, for educational and promotional purposes, that the compensation for their services are legitimately earned, legal, critical, and necessary to residential mortgage loan originations.
LENDERS COMPLIANCE GROUP is the first full-service, mortgage risk management firm in the country, specializing exclusively in mortgage compliance and offering a full suite of hands-on and automated services in residential mortgage banking.