How will mortgage loan officer compensation changes affect you?Posted: Updated:
PHOENIX -- Changes in the way mortgage brokers get paid kicked in on April 1, and that could affect how much you end up paying when you buy a home.
Consumer finance expert Dean Wegner broke it down for Tara Hitchcock.
The idea is to prevent loan officers from steering borrowers into high-commission loans.
Because the loan officer is no longer commissioned, he or she won't point you to a horrible rate plan, Wegner said. In addition, you cannot be overcharged fees.
Basically, you will be provided with a menu of rates and fee so you can choose what works best for you. The bank makes the same amount no matter what direction you go.
While this is supposed to be good for consumer, there is a downside.
Buyers who have difficult loans will probably be passed over. That will shrink the buyer pool and demand, which could drop home prices even more. An already limited industry will be limited even more.
In addition, people looking for small loans will also be passed over because the profit margins are too small to be worth the lender's time and effort.
Some 20,000 people are associated with mortgage origination in Arizona. They are the ones who will be most affected by the newly implements changes.
The new rules bring back the concept of points, in which you pay more money to lower your interest rate. Now those points will go toward your rate as opposed to a commission.
What the change does not affect is service levels. You should always know with whom you are dealing.
Finally, consumers should be prepared to pay their appraisal fees up front, and possibly lose that money if the loan fails to go through.