The people that need our help the most are those with low-to-moderate incomes. Increasing access to loans for low- to moderate-income borrowers is critical for many reasons, including allowing homeowners to stabilize their monthly housing expenses, build equity and accumulate wealth. It is our responsibility to look at ways to help resolve this issue.
Government-related programs for low-to-moderate income borrowers don’t always get shared with brokers by lenders. Also, brokers may find it challenging to make small loans because it would cost us money, and you can’t stay in business for long if you’re paying in order to close loans. That’s the unintended consequence of the 3% cap on points and fees for qualified mortgages, which includes those included in the rate set by the lender and effectively tends to be a 2.75% cap for brokers. If broker compensation that lenders include in the rate was excluded and only the commission payment to the originator was counted for third-party originators, we could help make more small loans. I think maybe policymakers need to make a carve out for mortgage brokers who are similar to small community banks.
The Consumer Financial Protection Bureau has a carve-out for small creditors. Small creditors play an important role in the mortgage industry because they generally try to maintain ongoing relationships with customers in a single community. The small mortgage broker business is generally the same and should be afforded some flexibility, particularly with regards to lender-paid compensation being included in the 3% points-and-fees cap.
Brokers can get above a break-even point if a loan is maybe $150,000 depending on their business model and costs. Brokers might even be able to go down to $100,000, but I get calls every day from people who want to buy houses in the $60,000 to $80,000 range. Occasionally, they are looking at a home with an even lower price point. Sometimes I can’t help those people. I could send them to the banks but it’s unlikely they’re going to spend the time to help those people. So it’s a numbers game. We want to be able to help those people. It’s why I opened up my own business. Every now and then, we’ll help someone even though it costs us money to help, but if I did it all the time I’d be out of business really fast. We could help so many more people if we had a carve out.