Is the Federal Reserve Board price fixing the mortgage business in violation of law? The Fed has a rule that they are making active on April 1 where each mortgage brokerage and banker (excluding banks) set a fixed percentage that they can charge each and every customer regardless of loan amount.
So, if a brokerage is made to charge 1% of the loan amount, the people who want a $40,000 mortgage will have to go to a bank that can charge them whatever they want and the person needing a $2,000,000 loan will go to the bank.
In essence, the banks will be able to price fix because the Fed will have taken so many companies out of the loop.
Technically, the Fed is violating many laws and even their own mission. Why are they doing this?
According to Marc Savitt, President of the National Association of Independent Housing Professionals (NAIHP)*, “In my opinion the why is because they want to help the banks. Stronger banks, less time and money for them. Plus, it makes them look like they’re doing their job.”
Savitt goes on to say “the fact the Federal Reserve Board doesn’t have the authority to restrict compensation, we at NAIHP knew for over a year. This has been long planned and it will make mortgages harder to come by and much more expensive.”
“NAIHP is fighting this with everything we have, including a strong grass roots network” Savitt added. “Since we represent everyone in the real estate industry including mortgage brokers, real estate agents, appraisers, title insurance, small banks and consumers, we must make sure that mortgages are provided in a fair way to the person buying a small starter home in Missouri and a mansion in Beverly Hills”
The solution? Savitt has has met with Elizabeth Warren, talked directly with the Fed, looked for guidance from other industry professionals and has had discussions with attorneys to possibly prepare a case or an injunction to stop the Fed from implementation.
“It stinks that we has hard working small business people have to waste our time volunteering to stop the banks from doing what they did to us in the past decade all over again,” said Savitt. “You would think they would want to get their mortgage business from the (now) NMLS licensed mortgage people that have been scrutinized more than a patted-down airline passenger! But no, they keep attacking.”
Savitt continues, “They have even started trying to limit what real estate agents can charge for commisions. I wouldn’t be shocked if they wanted to try to get Congress to let them be in real estate business.”
OK, NAR….ready to rock!
*Full disclosure- I am a Board Member of NAIHP and am working on this issue with him. He just comes off better than I do!