Loan originator’s compensation now limited
Loan Originator’s Compensation
Loan originators are a hard working group of people who have always been paid very well for that hard work. They must be very detail oriented. They have inside knowledge of an area that can be very confusing to a first time buyer. In short they have a big advantage over you the home buyer. When considering a loan originator’s compensation it is sometimes in their best interest to do exactly what is not in the buyer’s best interest. One example of this is pushing you into a higher interest loan than you qualify for.
The decision to buy a home is likely going to be the biggest financial decision of your life. This is not the time to hurry or be careless. Allow time for your own learning curve. Be a pest with questions. Wrap your head around what is actually happening. Where does each dollar really go? Don’t wait for the closing to start worrying about this. Closings are a time of joy but also a time of anxiety. The closing is the end of the process not the beginning. It will be no more than a formality if you have done enough comparison shopping and analysis to understand what is going on.
Deceptive Double Dipping has been banned
As of April 1, 2011 a law known as the “Loan Originator’s Compensation Amendment to Regulation Z” mandates that loan originators not receive extra compensation based on the interest rate or other loan terms. This is designed to remove the incentives for loan officers to push the consumer into a more lucrative loan that increases the loan originator’s compensation.
In short a loan originator’s compensation cannot be increased by collecting payments from both consumer and lender arising from the same transaction.
Furthermore Section 1413 of the Dodd-Frank Act provides that any violation of the loan originator’s compensation rules will provide the borrower with a “defense to foreclosure” for the life of the loan. This results in effectively barring the lender from ever foreclosing on the loan!
Now that’s a law with teeth!