Responce to Federal Reserve Board of Governors Regarding Amendments to Regulation Z Disclosure , Comments Mandated to End April 8, 2008 for Docket # R-1305

Below is my responce today to the Federal Reserve Board of Governors request for Comments on Regulation Z Amendments, Docket # R-1305:

 

To:  The Board of Governors of the Federal Reserve

 

From: Wayne L. Brown, Broker

San Diego, California 92109

 

Subject:  Docket No. R 1305

 

Thank you for the opportunity to express my views regarding the upcoming review and amendments to Regulation Z.  While I concur that consumers should be protected under the law and regulations, I do have some concerns regarding the proposed changes.

 

I come to you with more than 38 years of experience.  Twelve years in commercial banking, twenty in mortgage banking, and now 6 years as a Mortgage Broker.  Previously, I had reached executive rank in both industries.  My point is that I come to you with vast years of personal experience within the industry.

 

It has taken me a long time to draft this response as I feel in many ways threatened by many of the upcoming changes.  Additionally, we Brokers seem to be taking the brunt of the punishment for problems in our industry when in fact we All must take some form of blame and responsibility.

 

I specifically am concerned regarding the proposal to restrict compensation for mortgage brokers.  I am also very disillusioned over the fact that for years our industry has had to disclose All forms of revenue; whereas, Bankers and Mortgage Bankers Do Not have to follow the same form of disclosure.  This in itself places us in a disadvantage and makes us appear to be non-competitive with our competitors who do not have to disclose any back end revenue.  As a former Banker, this makes No sense to me at all.

 

I chose to become a Broker after years in the Banking and Mortgage Banking arena.  Believe me, I saw enough to make the decision to get out since I would not put up with what goes on behind management’s closed doors.  We Ethical Brokers strive to ensure that our customers are getting the best terms available.  The proposed changes will only further the cause of Reducing competition.

 

I feel that due to the mess that we are in, we Brokers are being made as the “ Sacrificial Lamb” so to speak.  While I agree that there have been bad characters in our business….our industry segment surely is Not alone in this arena.

 

Years ago, HUD, with the blessing of Congress and the Senate helped to pass changes to RESPA that forever changed the way we do business.  Specifically, Affiliated Business Arrangements (Originally called Controlled Business Arrangements) were created to basically legalize “ Kickbacks”.  What was intended as a bundling of services to reduce costs to consumers turned into “ Cash Cows” for all Builders, Large Real Estate Brokerages, Title and Escrow companies?  The Bankers and Mortgage Bankers rushed into this as well forming allegiance with various builders and Realtor shops to Control the flow of business.

 

I know this to be true since the mortgage banker that I worked for assigned me to one of these arrangements with the builder.  I left in less than a year after seeing first hand the “ Fleecing” of Americans so to speak.

 

A review and possible change is in order; however, Why disclosures are Not uniform for all is beyond my comprehension.  We must disclose YSP; whereas, Banks and Mortgage Bankers do not have to disclose any back end revenue.

 

There are times where this option allows the customer to choose whether to pay costs, or apply all or most of this to cover loan costs.  It is also almost impossible with rates being so volatile to guarantee exactly what we disclose up front.  Some borrowers elect to float, rather than lock, making this option almost impossible to guarantee.  Yes we should disclose, but we must be given the flexibility to change with the market.  The final result should also not be a surprise to the customer………but close or even less than originally disclosed.

 

I could go on for hours explaining the “Horrors “ I have seen over the years in ALL segments of the industry.

 

Let’s make sure that our consumer is protected, but in doing so, do not ruin a segment of the industry where most are ethical and honest.  If we are to disclose, it should be uniform for All.

 

Thank you for considering my comments. 

 

Wayne L. Brown

Mortgage Broker