WaMu Introduces Tough New Rules for Brokers; Will Require Disclosure of YSP
Washington Mututal today noted that it's getting tough on brokers in the wholesale channel, unveiling new rules and requirements designed to "help ensure that borrowers fully understand the terms of the loan their brokers are requesting in addition to the total compensation the borrower will pay to the broker for their service." WaMu said it will now require brokers to provide evidence that a broker has disclosed key terms of the loan such as loan amount, loan term, whether the interest rate and mortgage payments may change, and whether the borrower's pricing package carries a prepayment fee. WaMu also will require brokers to disclose the amount of all compensation the borrower will pay the broker for their services, including broker points, or administrative or processing fees, and whether the broker has requested a yield spread premium -- and the bank will attempt to contact borrowers prior to closing to review loan terms with each individual borrower. Read that again: the second part is the real news here. Industry-changing news, in fact -- I've heard some rumors recently suggest that banks committed to remaining in the wholesale lending space will adopt similar rules for brokers shortly. Some are allegedly considering going even further, requiring that brokers disclose the amount of YSP in a deal (not just that YSP exists). The full press release is available here. "We believe our mortgage broker standard and direct call program should become the new industry benchmark for brokers and lenders across the nation," said Kerry Killinger, WaMu Chairman and CEO. "By adopting these standards, together we can increase consumer knowledge of the home loan process and bring about positive, meaningful change to the mortgage industry." "Our wholesale business is an important component of our lending strategy and we value our relationships with the high-quality and customer-focused brokers we do business with,â€? said David Schneider, WaMu's Home Loans President. â€œWe believe that brokers will embrace this standard because an educated and informed consumer is the best customer for both WaMu and brokers alike."