Last Day to Pillage

It’s right there on my calendar, circled in red ink amidst various notes and coffee stains: “March 31, 2011, last day to pillage and loot.” And no, I’m not a pirate or a viking – I’m a Mortgage Banker.

According to who you listen to, I may just be the worst thing that has come along in a long list of terrible things. What kind of things? Think washed up rock band reunion concerts, paper cuts, bounced checks, garden gnomes and dog owners that don’t clean up after their dogs. Truly evil in other words. But that’s just one side of the story.

Others see us as benevolent saints, quietly working amidst jumbled piles of paper, bravely doing battle with underwriters to help innocent potential homebuyers buy that four bedroom yurt they have always dreamed of. “Honey, did you recommend sainthood for that wonderful Mark Aalto today?” I am sure the paperwork is all but signed even as I write.

All kidding aside, new rules as passed down by the Federal Reserve go into effect tomorrow, April 1. I would love it if Ben Bernanke calls up out of the blue tomorrow and says (after an awkward moment of silence and some pleasantries here and there) “Aalto, we were just kidding – there will be no rules implemented today. It was all an April Fool’s day ruse. Ha ha – boy did we ever get you!” But such wishful thinking is all for naught – the rules will be implemented and all of our lives will be impacted.

Loan Officer compensation has been a topic of much discussion over the last couple years and controversy surrounding this subject is nothing new. Consumer groups and lawmakers alike felt that consumers were being placed in the wrong programs or being charged higher rates motivated by maximizing profits for the Loan Officer. Starting with applications taken tomorrow, Loan Officers will no longer be able to set pricing for loans.

What we end up with is a system based on a lowest common denominator. In other words, it will no longer be possible for an originator to make more or less money based on the rate or loan program. This effectively will end some of the really bad practices that were taking place. You’re not going to see consumers placed into a loan that isn’t a good fit as a result of greed. Stupidity or ignorance maybe, but no longer greed. On the other hand, it will make it tougher for originators that were utilizing the system in a responsible way. For example, originators are no longer able to offer discounted rates or give credits to consumers. Overall, we have taken away the knives from our utility drawer and replaced them with sporks.

Within a few weeks these rules will become our new normal. Our compensation plans will no longer be the topic of discussion in coffee shops, endless meetings, conference calls etc. Life will go on. Ultimately the costs of lending will increase and our ability to help our customers will diminish. But, loans will still be made. The market will recover in spite of our best efforts to fix it.

And maybe, just maybe, we’ll be able to get our viking costumes out and run around just for old time’s sake.


5 thoughts on “Last Day to Pillage

  1. I couldn’t have said it better myself! For the most part I have no issues with compensation reform. It really doesn’t affect my LOs or my own production team. For all of us out there, and there are a lot due to the mass exodus from our industry due to recent regulation changes, that have performed our job with product knowledge and integrity won’t feel much….other than the fact that we are no longer able to discount our compensation for those borrowers that make our job easier. That has always been common practice for me…and that is gone!!! That is the bad part of this reform, and I think it is a big deal.

    1. Thanks for the reply Brandon. I enjoyed meeting with you not so long ago. I was impressed by the work you and your company had put in and by your dedication to doing the right thing for your Loan Officers and your consumers. Good luck to you in the future and thanks again for taking the time to read and comment today. Much appreciated. 🙂

  2. Nice post Mark…combining humor and facts at the same time makes it more palatable for the reader. Can’t change the market conditions, can’t always win against the regulations, but you can control your attitude and actions. The cream always rises to the top…see you there!

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