Mortgage Brokers to CFPB Official, Loud and Clear: Please Resign

The message sent this week from the National Association of Independent Housing Professionals to the Consumer Financial Protection Bureau’s Deputy Director Raj Date is clear and simple: Resign.

The association has called for Date’s resignation in light of comments he made at two separate mortgage and banking industry associations—comments that NAIHP says “attack mortgage brokers.”

At recent Mortgage Bankers Association and American Bankers Association conferences, Date spoke of changes to loan originator compensation that the bureau is currently considering.

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But his recap of the work of mortgage brokers in the past was biased and unfair, according to the NAIHP, which posted the following comments, made by Date, on its website:

“Let me give you an example from the mortgage bubble: the yield-spread premium. Too often it was the case that mortgage brokers were paid more to give borrowers a worse deal. If a borrower could qualify for a loan at, say, 6 percent, a broker might juice that rate from 6 percent up to 8 percent. As a result, the most important, most visible person in the mortgage process for many borrowers – the mortgage broker – had a financial stake that was confusingly and perversely in direct opposition to the interest of the consumer himself. If people are paid to treat customers poorly, it shouldn’t be surprising when they do.”

“The Federal Reserve Board and then Congress took important steps in this area, and it’s our job at the Bureau to propose and finalize regulations that end these practices. We’re working hard to do just that.”

NAIHP calls for his resignation, as posted on the site.

The CFPB defends its role in protecting consumers and adhering to the law established by the Dodd-Frank Act, and stresses its collection of industry input.

“In his remarks to the ABA, Mr. Date criticized a broken system in which some mortgage loan originators win when consumers lose,” CFPB spokesperson Jen Howard told RMD. “In enacting Dodd-Frank, Congress outlawed the practices Mr. Date discussed for the reasons he explained in his speech. The Consumer Bureau is in the early stages of developing rules to implement this new prohibition and welcomes the input of all stakeholders as it moves through the process.”

Written by Elizabeth Ecker

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  • Yet were the comments of the Deputy Director inaccurate?  

    Brokers have long claimed that they need YSP to be competitive and help provide better deals for borrowers than lenders might otherwise consider.  If this practice was common in the least, why are the cited comments of the Deputy Director deserving of a call for resignation?  He spoke of the past, not current practices.  He made it clear, however, one goal of the CFPB is to write rules which end such practices.While brokers were certainly not the only source of mortgage abuse, there seems to be an abundance of concern that the abuse of brokers not be pointed out even by regulators.  By calling for the resignation of the Deputy Director, “me thinks they [the two organizations] protest far too much.”  Whatever retribution comes of this call for resignation seems somewhat deserved; however, the ones who will receive the brunt of the retribution will be brokers, not the deserving organizations, whether or not the brokers belong to the organizations or even agree with their state positions.    

  • If government bureaucrats are allowed to arbitarily attack, suffocate, entangle in regulations, and weild power over private business based on their personal likes and dislikes, political philosphy,   its not surprising that they do so……

  • Hasn’t this issue already been addressed by the current compensation rules?  Regardless, why is he pointing out mortgage brokers and not including mortgage bankers and banks in his accusations (possibly because of their political power?).  But maybe even more importantly, when will the Obama administration implement their control over the profits of automobile and shoe retailers?

  • Critic,
    We brokers can no longer use the YSP to help our borrowers as we are not allowed to use it to pay for any fees, only the banks can do this. I read the transcript and I did not really see where Mr. Date said anything really harmful to us. The problem is that the pendulum has swung far to much to the other side in regards to how the brokers can operate. I think everyone would agree that there was a lot of bad practices taking place throughout our industry and not with just the brokers but we do seem to be the scapegoats and the ones that are being driven out of the business.
    Much reform was needed and much reform we have got! Licensing, testing, background checks, all of this is good but it needs to be for everyone not just a few. The CFPB is trying to do to much to soon because of the late start it got and the time tables it is suppose work under. My father was a great leader in his company and he always told me “listen to what others have to say and learn from them, work with people not against them” The CFPB is not listening enough and they definitely are not working with us, and for that we the brokers are going to lose and I fully believe the industry will suffer because of it.

    • EricSD,

      While there were many, many reasons given for needing broker YSP, how it practically worked appeared to be much, much different.  What seemed to occur is those consumers who were willing to participate in a negotiated bidding war saw the benefits of YSP by getting lower and lower costs on mortgages.

      Prior to Dodd-Frank, it seemed total loan broker origination revenues (both front end and back end) were not based on service or the need of the consumer but on how willing the consumer was in getting competitive bids.  It was somewhat insane and seemed far less professional than a bidding war.

      The process got pretty ugly and rather unprofessional at times.  So paying more seemed more like a function of taking advantage of some consumers over others.  Those less willing to call around and get the price down, paid the higher price.  It was like shopping for a used car than going to the doctor’s office.

      • Critic,
        I agree that did get ugly and made us look unprofessional at times. But as far as taking advantage of one customer over another though I disagree. We are suppose to live in a capitalistic, free market society and this is where I and a lot of people have a problem when the government makes it there business to tell me how much I can make and how much I can charge. I understand fees might need to be with in reason that is why they put a cap on them but saying someone over paid or was over charged I do not agree with. We as consumers have the ability to shop around and it is how business has always been done. I do it, you do it, everyone does it. Enough said as I do not want to go on a rant.
        But now with Dodd-Frank, I as a broker do not have the ability ti be flexabile in being able to us the back end to pay for the fees without greatly reducing my profit. Am I the only one who sees this and has a problem with it?

      • Most brokers see it exactly the way you do but that fails to address why these organizations should be calling for the resignation of the Deputy Director. As long as Dodd-Frank is the law of the land they need to be diligent to pounce on wrongs, even prior wrongs. They are just doing their job.

        My problem is why do they have a job at all. A lot of people in our industry wanted this President but now are lamenting because he told us what he wanted to do as did his minions, Professor Elizabeth Warren (Mann) and former Senator Dodd. We may lose the Obama health Act but Dodd-Frank is pretty much here to stay.

      • I agree that is not why these organizations are calling for his resignation, just got off track of the topic:) But when WILL this unfair practice be addressed? I also agree that Dodd-Frank is here to stay, I just do not see it getting overturned but maybe it can get fixed?

  • The practice refereed to has been going on in the traditional/forward arena for years. maybe we need to roll the clock back 5 years and go to what we had then. that should satisfy the CFPB?

    John Smaldone

  • The real issue here is why go to the extreme of calling for the resignation of this man? If it seems he is overly fixated on brokers, then why not register a complaint with the Director first and if the Director does not appear to properly respond then call for the resignation of the Deputy Director.

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