Saturday, March 29, 2008

reviewing two definitions while I work....


Mortgage broker
means a person (not
an employee of a lender) or entity that
renders origination services in a table
funded or intermediary transaction. A
loan correspondent approved under 24
CFR 202.8 for Federal Housing
Administration programs is a mortgage
broker for purposes of this part.

Origination service means any service
involved in the creation of a mortgage
loan, including but not limited to the
taking of loan applications, loan
processing, and the underwriting and
funding of loans, and the processing and
administrative services required to
perform these functions.

Follow me now in my train of thought. I am very interested in your comments as to whether I am coming up with the correct conclusions.

I have three transactions before me which have been originated by three different types of entities. They are:
  • a licensed mortgage broker
  • a local bank selling a transaction servicing released - The bank has the ability to service, however, it is clear in this transaction that they are performing delegated underwriting and have no intention of retaining this loan. It is clearly being sold immediately, however the bank is funding the closing not the lender.
  • a lender
My main concern at this point in my thinking is NOT the first or the third transactions. They are clearly mortgage broker and lender. It's the second transaction that has me wondering whether or not this local bank should be completing the GFE as a mortgage broker.

The lender is NOT tablefunding. The bank is clearly funding the closing, however, the bank, in my mind, is acting as an intermediary. Though they have the ability to retain the loan, I would argue that they would NOT originate the product for portfolio or take market risk. These loans are being sold under a correspondent program. There is no definition in the RESPA Proposed Rules for the word "intermediary" as it is used in the definition of a mortgage broker. [I THINK WE NEED A DEFINITION. THIS WILL BE INCLUDED IN MY COMMENTS. MAYBE YOU SHOULD INCLUDE IT IN YOUR COMMENTS.]

Other thoughts popped into my mind as I read these two definitions. Read carefully the definition of loan origination services. If a non-employee performs these tasks, even as an exclusive agent of the lender, the non-employee becomes a mortgage broker. Am I right?

My guess is that the intention of HUD is to use these two definitions to direct the preparation of the GFE. If that is the case and a lender uses non-employees to meet with the consumer in their home and sign loan application documents, would that trigger the need for a lender to follow mortgage broker rules for a GFE? If a lender uses contract underwriters, would that trigger some kind of mortgage broker rule? I'm confused here. [I THINK WE NEED CLARIFICATION. THIS WILL BE INCLUDED IN MY COMMENTS. MAYBE YOU SHOULD INCLUDE IT IN YOUR COMMENTS.]

My way of thinking this stuff through at this point is NOT to talk about what is fair. At this stage in the rule making process I am accepting that the intention of HUD is set and that we are in the "clean up the words" phase and also, the "point to unintended logistical problems" phase. In my experience, comments directed to those ends will have the most impact in the final rulemaking process.

So, with that in mind, I don't see the point in writing comments that attempt to stop or delay the process, though I support freedom of speech. We're years into this rule, years, and so wholesale change isn't likely. I'd much rather write comments that have a shot at making a difference. Make sense? Work on tweaks that help. Be part of the positive team.

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