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Thursday, January 17, 2008

Sen. Tom Continues His Life as a Born Again Democrat. And You Know How Zealous Born Again Types Can Be.

posted by on January 17 at 17:35 PM

Here’s another bill that pushes the Democratic theme that’s emerging this session that I Slogged about yesterday: housing issues.

The hearing is at 8am, so I’m not going to make it, but the bill deserves attention.

It offers up a common-sense fix to one problem with the mortgage industry. The bill forces mortgage brokers to disclose any special fees (kickbacks?) they get from lenders.

The intent of the bill is to rein in a practice known as “yield spread premiums.” This is when lenders give mortgage brokers an incentive to hook borrowers up with steeper rates than necessary by giving them a cut.

The bill is being sponsored by Republican-House-member-turned-Democratic-Senator, Rodney Tom (D-48, Medina).

RSS icon Comments


Well, cool. Good to know he's adapting to being a Dem quickly.

Posted by Will in Seattle | January 17, 2008 5:50 PM

You're a bit off the mark on this one, Josh. Recent legislation proposed by Barney Frank in the U.S. House originally called for banning YSPs, but that part of the measure was indeed axed for good reason.

More info about the National Association of Mortgage Brokers' successful lobbying for YSPs here.

Not as "common sense" as you might think, buddy boy.

Posted by Voice of Reason | January 17, 2008 6:11 PM

So in other words, fat chance this passes in Washington state. And in the long run, we might be better for it.

Posted by Voice of Reason | January 17, 2008 6:13 PM

As someone who worked in the mortgage industry for a while, I think this is a bad idea. The reasons why:

1. originators of loans have to get paid somehow. They get paid one of 2 ways, the bank pays them to sell a higher rate, or the person getting the loan pays as part of the closing costs.

2. Brokers are required by law to disclose what the bank is paying them for selling the higher rate.

3. in many situations borrowers cannot get the loan if they have to pay up front costs as this eats into their equity.

lets say that you got one of those 2 year interest only arms. you bought your place for 300k with 30k down. 2 years have passed and you want to get a 30 year fixed loan, and your property is appraised at 330k now. you have 20% equity, which means that you shouldn't be paying mortgage insurance anymore. If a bank won't give you a loan, and you have to go to a broker, they will have to charge all the fees on the front of the loan. This means that they will have to pay 10k or so out of pocket, or roll those costs into the loan, eating up 1/6th of the equity that they have in the home, making the borrower pay mortgage insurance (about a 10% rise in payment) and insuring that they will probably have to refinance again in the near future.

Removing the options that borrowers have to get a loan is always bad. If they are so concerned about this, make BORROWERS attend a 2-4 hour class on how mortgages are set up, or make them pass a test on how loans work. that would have a much better effect.

Posted by wisepunk | January 17, 2008 6:13 PM

I think the fact that they actually had to finally get licensed will probably take care of a good number of abuses.

Posted by Gitai | January 17, 2008 9:07 PM

I routinely give car dealerships a 3 point

Posted by Gouger | January 18, 2008 10:52 AM

Good on him!

Posted by NapoleonXIV | January 18, 2008 2:02 PM

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