A little breathing room for buyers

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Starting this year, there will be two new rules in effect for “qualified mortgages” or QMs, one that affects the amount that lenders can charge and one that affects the amount the buyer can borrow.

The change mandates that lenders cannot charge fees of more than 3 percent of the loan amount. This limit such mortgage charges as underwriting fees and origination fees, but excludes title and attorney fees. This has most of the mortgage industry in an uproar because it limits what a mortgage company or bank can charge a consumer. Personally, I believe that this is a good thing because it prevents mortgage companies and banks from heaping enormous fees upon uninformed consumers. But there is one problem.

The fee unfairly burdens mortgage brokers, because they must include more fees in their calculations than those of banks and mortgage bankers. Mortgage brokers have to include the compensation that a bank (not the borrower) is paying them for the loan, whereas banks and mortgage bankers do not. While I am a supporter of the QM rule because its helps the consumer, I do believe that the playing field should be the same for all mortgage outlets. I believe that part of this was done to make things harder on mortgage brokers, but in the end, I think it will make them more competitive.

The mortgage broker was used as a scapegoat for the real estate and mortgage fiasco of the last decade, but let me inform you that all sectors or the mortgage industry were involved. Just look at what JP Mortgage Chase and Bank of America have agreed to pay in the past few months to make their legal woes go away. Both are in the billions of dollars and there seems to be more in the pipeline for other companies. Last time I checked, Chase and Bank of America were not mortgage brokers.

All of us in the mortgage industry should be looking to make smaller margins on loans, making up the margin in larger volume, as opposed to gouging the consumer on every loan and doing very little volume.

The second change affects manually underwritten loans. All loans are currently approved by a computer software program, with a ban on loans that exceed 43 percent of the borrower’s gross income. The new rule allows banks to consider manually underwritten loans, as long as they stay within the 43 percent benchmark.

For more, call 773-557-1000 ext. 15, e-mail ron@ronmortgage.com or visit www.ronmortgage.com.

About Ron Ricchio

Renato (Ron) Ricchio is president of Chicagoland Home Mortgage. He grew up in Westchester and attended St. Joseph High School and DePaul University, taking a job as a loan officer in the mortgage industry soon after graduating with a bachelor's in finance in 1991. He started his own company in 2001, which he operates today. He has been ranked in the top 150 loan originators in 2010 and 2011 by Origination News. Ron is happily married with three beautiful children. A board member of San Francesco Di Paola Society and the founder of Ricchio Family Toy Drive for Lurie's Children's Hospital, he enjoys cooking and spending time with family and friends.

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