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100%NODOCLOL
Flash in the pan


Joined: 28 Mar 2008
Posts: 28
Location: FL

Question about compensation on VA loan
PostPosted: Fri Apr 08, 2011 3:10 pm Reply with quoteBack to top

With the new compensation regulation now in effect, my intention was to only utilize consumer paid compensation. However, I think my reasoning for doing so is flawed when it comes to VA loans. It is my understanding that on a VA loan, you can only charge a 1% origination fee. In that case, I would have to go lender paid if I wanted to make more.... However, here's where my confusion comes in. When the new GFE came out, it was designed to now show all compensation up front and then a credit to the borrower. Having said that, I have many GFE's from VA loans that I closed over the last year and a half that show well more than 1% in block 1 of the GFE and I never had a problem. If I'm understanding the new consumer paid model correctly, nothing is really changing as block 1 will still show total origination and then a credit. Only difference is the credit is towards the buyers closing costs/prepaids as opposed to my origination fee. So.... Can I still charge 2% up front and have the lender give a credit of 2% towards closing costs, or would I be in violation per VA? This will look the same on the GFE as it has for the last year and a half. Any info or clarification would be greatly appreciated!
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MarxBrother
Cherry Bomb


Joined: 07 Feb 2008
Posts: 164

Re: Question about compensation on VA loan
PostPosted: Sat Apr 09, 2011 8:37 pm Reply with quoteBack to top

"total origination" in box 1, which includes the mix of all comp, borrower and lender-paid, has never been capped by the VA. All VA cares about is that no more than one point in origination is paid directly by the veteran.

Because the new fed rule does not allow loan originators to collect both borrower and lender-paid comp on the same loan, if you need to make 2% per your comp plan, you would have to price at 104.000 to achieve that and pay 2 points in closing costs. VA will limit you to one point from the borrower and you can no longer do a borrower and lender-paid split of your comp.

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Do_the_math
The WhistleBlower


Joined: 14 Mar 2007
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Re: Question about compensation on VA loan
PostPosted: Sat Apr 09, 2011 9:25 pm Reply with quoteBack to top

The best way for lenders to handle lender paid comp on VA loans if the lender to provide net pricing that includes a charge of 1% origination from the lender to the borrower, and options for YSP credits/additional discount to the borrower.

Assume 2% compensation to a broker on a VA loan with 1% origination and 1% YSP. This can be accomplished if the origination is charged by the lender, and the pricing is net the other 1%:

Examples (note: Rates are not actual and are used for example only).

5.75% @ 1% origination and 2.5% YSP credit to borrower (broker is paid 2%)

5.5% @ 1% origination and 1.5% YSP credit to borrower (broker is paid 2%)

5.0% @ 1% origination and .50% YSP credit to borrower (broker is paid 2%)

4.75% @ 1% origination at par (broker is paid 2%)

4.5% @ 1% origination and 1% discount charged to borrower by lender (broker is paid 2%)

As long as pricing is net the broker fee and any borrower charges are made by the creditor, and the creditor pays the broker, there is no reason why brokers should still not be able to continue to enjoy offering mixed price options to borrowers. However, if the rate sheets do not net out the broker compensation and the creditor is not willing to charge the borrower, brokers would be forced to insure that YSP is sufficient to cover their origination charges and would only be able to offer borrower's above par rates.

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MakingIt
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Joined: 04 Dec 2007
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Re: Question about compensation on VA loan
PostPosted: Sun Apr 10, 2011 12:48 am Reply with quoteBack to top

Do_the_math wrote:
The best way for lenders to handle lender paid comp on VA loans if the lender to provide net pricing that includes a charge of 1% origination from the lender to the borrower, and options for YSP credits/additional discount to the borrower.



How about 0 pts so the borrower can pay for Escrow, email docs, etc that might be in contract ? The borrower can pay these up to 1% if 1% orig is not charged.
I have found it more flexible for the Agent writing the contract if done that way.
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Snets
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Joined: 12 Nov 2008
Posts: 875
Location: Palm Beach County

Re: Question about compensation on VA loan
PostPosted: Sun Apr 10, 2011 1:52 am Reply with quoteBack to top

Do the Math - where the bleedin' heck have you been???? We need your take on stuff - I mean we really do - I mean there's The Oracle at Delphi, Expedia, Google and Do The Math, and not particularly in that order - come one girl we've missed you....
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Do_the_math
The WhistleBlower


Joined: 14 Mar 2007
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Re: Question about compensation on VA loan
PostPosted: Sun Apr 10, 2011 2:10 am Reply with quoteBack to top

Snets wrote:
Do the Math - where the bleedin' heck have you been???? We need your take on stuff - I mean we really do - I mean there's The Oracle at Delphi, Expedia, Google and Do The Math, and not particularly in that order - come one girl we've missed you....


Embarassed

LOL! Thank you, Snets.

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Do_the_math
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Re: Question about compensation on VA loan
PostPosted: Sun Apr 10, 2011 2:12 am Reply with quoteBack to top

MakingIt wrote:
Do_the_math wrote:
The best way for lenders to handle lender paid comp on VA loans if the lender to provide net pricing that includes a charge of 1% origination from the lender to the borrower, and options for YSP credits/additional discount to the borrower.



How about 0 pts so the borrower can pay for Escrow, email docs, etc that might be in contract ? The borrower can pay these up to 1% if 1% orig is not charged.
I have found it more flexible for the Agent writing the contract if done that way.


On VA, borrower can't pay for Escrow and other non-allowables, and if the lender is paying has to be factored into the price (but cannot impact broker compensation). The lender, and not the broker and/originator can pay.

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MakingIt
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Joined: 04 Dec 2007
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Re: Question about compensation on VA loan
PostPosted: Sun Apr 10, 2011 8:34 pm Reply with quoteBack to top

Do_the_math wrote:
MakingIt wrote:
Do_the_math wrote:
The best way for lenders to handle lender paid comp on VA loans if the lender to provide net pricing that includes a charge of 1% origination from the lender to the borrower, and options for YSP credits/additional discount to the borrower.



How about 0 pts so the borrower can pay for Escrow, email docs, etc that might be in contract ? The borrower can pay these up to 1% if 1% orig is not charged.
I have found it more flexible for the Agent writing the contract if done that way.


On VA, borrower can't pay for Escrow and other non-allowables, and if the lender is paying has to be factored into the price (but cannot impact broker compensation). The lender, and not the broker and/originator can pay.


I did 3 last year with WF where the borrower split escrow 50/50 , and I didn't charge the 1 %. Per them, as long as it's not over the 1% it's fine.
Like many, my VA lenders are limited.
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Do_the_math
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Re: Question about compensation on VA loan
PostPosted: Mon Apr 11, 2011 6:33 am Reply with quoteBack to top

Are you sure the escrow fee wasn't paid by the lender as part of the 1% origination fee as opposed to an itemized charge to the veteran?

I can understand a 1% charge to the veteran that includes costs such as appraisal and escrow, but cannot comprehend an itemized charge to the veteran for escrow and a 1% origination charge.

Please clarify.

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MakingIt
Nitroglycerin


Joined: 04 Dec 2007
Posts: 629

Re: Question about compensation on VA loan
PostPosted: Mon Apr 11, 2011 7:40 am Reply with quoteBack to top

Do_the_math wrote:
Are you sure the escrow fee wasn't paid by the lender as part of the 1% origination fee as opposed to an itemized charge to the veteran?

I can understand a 1% charge to the veteran that includes costs such as appraisal and escrow, but cannot comprehend an itemized charge to the veteran for escrow and a 1% origination charge.

Please clarify.

1% was not charged (aka no points).
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