1) Loan Officers will be under contract to make the same amount on every loan.
(i.e. they will make 1%, or 2.5% or 3% or whatever they agree to on EVERY loan).
2) Will not have the ability to give Lender Credits at closing… but as Branch Managers we can.
3) Compensation can only come from either Borrower or Lender... not both (most of the time the compensation will come from the lender… so either you will have lower closing costs and higher rates, or lower rates and higher closing costs).
This could become a BIG issue at closing. Let's say a loan officer is purchasing a home with a loan of $100,000 and he is one a 1% contract for his compensation ($100,000 x 1% = $1,000).
Now, suppose the borrower is planning on bringing in $5,000 at closing. They have an emergency and only have $4,500 available when they go to close on their new home. Under normal circumstances a loan officer could just give them a credit for $500 to get the loan to go through, so their agent can be paid and they can make a little.
Since the loan officer is under contract to make 1%, the company he works for is required by contract to still pay him 1% or $1,000 on that transaction even though he would be fine only making $500. He still must make $1,000 or his company is violating the new Dodd-Frank law.
They are such geniuses, all this will do is increase costs passed on to the consumer because the lenders are going to pad their profits for contingencies like this and pass it along to the consumer. I guess the real winner in all this are the banks... oh, and Frank and Dodd. You may have heard of Senator Dodd's "sweetheart" loan he got with Countrywide (huge lobby group). He lost all his paperwork and so did Countrywide, so no one really knows how he got the loan from them.
Politics at it's lowest. Brace yourselves because the housing recovery is now going to take a bit longer to recover from thanks to these 2 Yahoo's!!
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