Lock Mess
Numerous mortgage brokers and loan officers apparently rushed to get as many loans as possible into the pipeline before their compensation plans changed this month.
But they rushed the wrong part of the process.
On March 31, the day before the Federal Reserve's compensation
"Everybody was trying to get in whatever they could under the old plans," said Marc Savitt, president of the National Association of Independent Housing Professionals, a trade group for brokers.
A secondary marketing executive, who did not want to be identified, interpreted the spike in locks less charitably: "They talked borrowers into locking on a specific day, which is proof that loan officers work in their own interests."
If so, the joke's on them, for two reasons.
First, the rule applies to loans for which borrowers submitted applications on or after the effective date.
So rather than scrambling to get rates locked on the eve of the effective date, loan officers might have done better to take more applications.
Moreover, the rule did not actually take effect until April 5, because at the eleventh hour Savitt's group and the National Association of Mortgage Brokers — which had sued to block implementation of the rule — obtained a short-lived restraining order. That means brokers and loan officers had a few additional business days to take applications under their old payment plans.
The Federal Reserve rule bans any compensation tied to the interest rate or any other term or condition of the loan.
It also forbids brokers to "steer" a consumer to a lender offering less-favorable terms in order to increase the broker's pay.
The rule allows a mortgage broker or loan officer to be paid by the borrower or the lender but not both.
Employers like Matthew Pineda, president of Castle & Cooke Mortgage LLC in Salt Lake City, have repeatedly told loan officers they could get paid the same based on other factors such as volume. Yet his firm recorded $11 million in interest rate locks on March 31 — the highest one-day volume in nearly a year.
"I would like to believe that loan officers were ignorant instead of that they didn't believe management," Pineda said.
Walkaway Detector
Fair Isaac Corp. says it has found a way to identify which borrowers are more likely to default strategically on their mortgages.
The maker of FICO scores said borrowers who
As a result, strategic defaulters display a different type of credit behavior than those distressed borrowers who miss a mortgage payment. As many as 35% of mortgage defaults are strategic, according to a study last year by University of Chicago researchers.
Andrew Jennings, Fair Isaac's chief analytics officer, has estimated that by targeting as few as 20% of their customers for early interventions, servicers could reach two-thirds of borrowers who are most likely to commit a strategic default.
Once contact has been made, Fair Isaac suggests that servicers explain to potential strategic defaulters that their credit scores would suffer and they would be shut out of the housing market for an extended period of time if they walk away.
The Minneapolis vendor also suggests that servicers warn borrowers that they will use all available means to collect the debt. Talk about tough love.
Better than BP
What's worse: An oil giant responsible for one of the biggest environmental disasters in history, or the largest bank in America? Thousands of consumers have determined that the latter is the lesser of two evils, but only slightly.
In Consumerist.com's Worst Company in America Tournament that wrapped up on Sunday, BP narrowly edged out Bank of America Corp. for the
(Once again, we feel compelled to clarify that this award is not named for the
Claiming 50.87% of the votes, BP's margin of victory over Bank of America was the slimmest in the contest's six-year history, Consumerist.com said. Just so the bank doesn't feel slighted, the website will honor it with a first-ever Silver Poo Award.
Consumerist.com pointed out that Bank of America does have a Golden Poo Award under its, er, belt — one it inherited when it bought Countrywide Financial Corp., a previous Worst Company in America "honoree."
A number of financial companies were in the running this year. Among the 32 nominees were JPMorgan Chase & Co., Wells Fargo & Co., Citigroup Inc., American Express Co. and Capital One Financial Corp.
Consumerist.com is owned by Consumers Union, which also publishes the more staid Consumer Reports.
