The QM Rule and your company’s relationships can affect your income?

Does your company or organization have relationships? Of course they do, they have plenty of them, vendors, clients, customers, employees, banking, etc.. but what if your employer took it to the next level and created a closer relationship with a supplier of services? What does this matter to me you ask? Well if you work at one of these companies and they own or have an affiliated relationship with a title company, appraisal company, or other provider of real estate lending required services, this arrangement may soon hit you were it hurts the most – your paycheck.

Maybe you are asking yourself – why and how would it affect my income if my employer has affiliated relationships? Well thanks to a little section of the Qualified Mortgage Rule, (1026.32(b)(1)(iii), any real estate-related fees (title/escrow, doc prep, credit report or appraisal) that are paid to an affiliate of the creditor must be included in the 3% point/fees cap.

Loan originators have already seen their income shrink between a depressed market and increased regulations. Now if your company has a piece of a title company or AMC you may see your income per loan reduced another $400 – $1500+. Let’s take an example, if your closing an average of 5 loans a month, well after January 10, 2014 your potential income could be reduced as much as $7500 a month, that’s 90k a year of potential income to you lost, because your employer owns a bit (or all) of a company providing your borrower real estate-related services.

So what’s a creditor to do? Do they hang on to their affiliated relationships and that income stream they receive or do they jump ship before facing a mass exodus of their best loan officers.

There is a bill (HR 1077) currently trying to make its way through Congress that would (amongst other adjustments) exclude from the 3% cap, fees paid to lender-affiliated title entities. Two things to keep in mind here, first it would have to make it through both the house and senate and be signed by the president, an always daunting task but in light of today’s current political climate you may have an easier time convincing the entire stadium at Fenway to sing New York, New York.

Second, did you notice the fine print in there? Let’s look at it again. HR 1077 would exclude from the 3% cap, fees paid to lender-affiliated title entities. That’s right the exclusion (if passed) will only include title entities, so if your company has any other affiliate relationships (credit, inspection, or appraisal) those fees will have to be included in the 3% cap. Let’s look again at the earlier example. Again say you close on average 5 loans a month and your employer owns an Appraisal Management Company. That could be up to $2000 + of potential income you lose every month, or 24k a year out of your pocket.

This is only another one of the many small details to pay attention to with these new regulations coming into full effect soon. Make sure you are aware of how your current corporate structure can affect your bottom line.