Matt Joy, Princeton Mortgage
Are there any other lenders out there that are frustrated by losing deals over MI premiums?
What about you MI companies? Are you frustrated that some of the largest lenders in the country steer their MI business to specific MI companies because they offer discounted rates in exchange for volume guarantees?
Earlier this week we lost a deal despite having better pricing for the borrower, enough spread for the broker to make full lender paid comp and cover the origination. Do you know why we lost that deal? Cheaper mortgage insurance. Our best quote came in $30 light compared to the lender we lost the deal to. How is that possible? Why our partner’s borrower’s being charged more to go with us compared to the other lender? The borrower’s qualifications didn’t change. Does that borrower have a better chance of defaulting with us compared to the lender we lost the deal to? We’re comparing apples to apples with the MI scenario… so what is it?
Well… rumor has it (I’m not actually sure how much of rumor it is any more) that 2 of the nation’s largest wholesale lenders and apparently, a few other well-known lenders put out a bid every quarter or so to the 6 MI companies guaranteeing them a certain volume amount of their Borrower-Paid MI business and in return those lenders want lower BPMI rates. My own personal investigation into this (which was essentially me calling all of our MI reps and complaining) led me to the conclusion that at least 2 of 6 MI companies jumped at the chance of guaranteed business and are offering different rate cards (with better pricing) to those lenders.
Sounds a bit shady, right? I mean don’t get me wrong. This is America. It’s eat or get eaten. I get it. What I don’t get it is the secrecy. It’s almost taboo to talk about it and I’m sure you’re all just dying to know who the participants are in this volume for rate exchange, right?! Unfortunately, I’m not in the business of spreading rumors or making claims that could upset my own apple cart… however, Rob Chrisman blogged about this topic a little over a year ago. Check it out here.
Oh, and don’t expect the lenders or MI companies to spill the beans. They are very tight lipped about this. In fact, if you push an MI rep at one of the participating companies their face turns red and their ears start to steam. The participating lenders aren’t any better. They have packaged this MI up as their own product elite this and advantage that… making it seem as if they are not only in the business of originating mortgage but insuring them as well. I actually had one broker tell me that “…see, that would never happen with [X Mortgage Company] they have their own MI company.” WHAT?! I thought the agencies put an end to negotiating borrower paid MI prices a while ago… guess not.
So… what do we do about it? Personally, I think we as lenders need to push back a bit and continue to make a fuss about this. Get on the horn with your MI reps!! Tell them you want the reduced Borrower Paid MI premiums!! Ask them, why should a company that is participating in this “volume guarantee” get our MI business? Clearly, they have all of the business they need, right?
Talk to you soon!
The opinions expressed in this post are the sole view of the writer and do not reflect the opinion of Princeton Mortgage Corporation.