United Wholesale Mortgage did an analysis on the loans it is buying and less then 5% of its business will be affected under the rule set to go into effect, said Mat Ishbia, president.
There are originators currently charging two points and even two-and-a-half points and loans of every size with those fees will meet QM, he says.
QM is coming but it will cause brokers more grief if they concentrate on that and not their business.
UWM will be offering a non-QM product and expects to come out with it even before next January, Ishbia said. Carrington Mortgage Services will also be offering a non-QM product. Brokers need to team up with a lender who has that in its menu, says its senior vice president and national sales director Rey Maninang. Originators should work with wholesalers who have strong compliance and legal departments.
Plaza Home Loans also did an analysis of the loans it purchases and found its average broker compensation is two-and-one-quarter points. As a result, the 3% test should not be an issue, says Jeff Leinan, divisional executive.
There will be a viable non-QM market, but it is too early to know if Plaza will be offering such a product.
It is focusing on getting mortgage brokers educated about QM so that it does not become disruptive to everyones real business, which is originating loans.
The non-QM business will be big, says Maninang, because the underwriting standards for QM loans are tight. Many borrowers will be eliminated from the market.
It is not a return to subprime lending, it is a return to common sense lending, he says.
Going one step further, the quality of some QM loans will not be as good as some non-QM loans, Ishbia says. These are good quality borrowers who deserve a loan and have better credit than some QM-eligible consumers.
The preference is that the rules be equal for all originators, Ishbia adds. But the reality is that is not how it is.
For wholesalers, the name of the game is what are the rules and how can they help mortgage brokers maneuver through them, says Maninang.
There are many business reasons a mortgage broker should consider making the move to mini-correspondent. However, the 3% fee cap is not one of them, all three panelists agree. The Consumer Financial Protection Bureau is not stupid and it is likely to come down hard on a company that makes the move still otherwise operates like a broker, Maninang says.
Brokers were not the cause of the problems, says Ishbia. There were those that did wrong, as there were banks and Wall Street firms which also did wrong.