Mortgage brokers are certainly enduring their fair share of criticism throughout this mess — invective that is clearly deserved on some levels — but, for all the slings and arrows tossed their way thus far, few brokers have yet seen their ability to earn legislated into a box. If the Florida Office of Financial Regulation gets its way, however, mortgage brokers in the Sunshine State may soon face caps on how much they can charge per transaction. It’s a move that the state regulator now says is needed to prevent future abuses, after the Miami Herald broke a story in August 2008 that found that more than 10,000 of the mortgage brokers in Florida had criminal records — brokers that were licensed by the state. The sweeping mortgage reform bill contains other measures, including new requirements of annual criminal background checks for licensed brokers as well as a new affordability requirement for loans originated via brokers, but it’s the fee cap that clearly is drawing the most attention from the industry. The FOFR’s proposal would cap origination fees at 2 percent of a loan’s value, a move that brokers in the state told the Miami Herald would likely put the vast majority out of business. The Herald interviewed Margaret Kennedy, president of the Suncoast chapter of the Florida Association of Mortgage Brokers, who said that a 2 percent cap was too low. She told the paper that a cap of about 4 percent would be more amenable to the broker crowd. “You don’t want to gouge the consumer,” Kennedy told the Herald. “You want to be fair. At the same time, we have to make a living.” Brokers have become increasingly frustrated at what they see as unfair treatment at the hand of state regulators, relative to retail originators and other non-brokers in the mortgage funding space. A recently-passed final rule to amend the Real Estate Settlement and Procedures Act, for example, led the National Association of Mortgage Brokers to sue the Department of Housing and Urban Development. The brokers’ association claims that by forcing third-party originators to disclose yield spread premium — disclosures not required of retail originators — regulators are favoring one business model over the other. The harsh truth now facing most of the nation’s remaining mortgage brokers, however, is that loans originated via third parties have been, and continue to be, among the worst-performing loans on any bank’s books. So long as that’s the case, it’s likely also going to be the case that regulators will focus their legislative pens in the direction of where the bad loans have been coming from — fairly or not. Write to Paul Jackson at [email protected].

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