Proposal to limit commissions of realtors and mortgage brokers

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Submitted by TheBreeze on July 19, 2008 - 6:29pm

So we've all heard how the GSEs are buying or backing 80% of all mortgages today. FHA is probably the other 20%. This means that the outrageous incomes of realtors and mortgage brokers are basically being subsidized by the U.S. taxpayer.

With Freddie and Fannie able to buy $700K mortgage loans, the American taxpayer is subsidizing up to $40,000 in realtor commissions (assuming 6% commission) on these transactions. Mortgage broker commissions are probably similar. Thus, the American taxpayer could be subsidizing $80,000 in commissions on a single transaction. This is an outrage and needs to stop immediately.

I propose that the government pass new laws that would limit how much realtors and mortgage brokers can make on a mortgage that is backed or bought by any of the GSEs or FHA. I propose that the government limit commissions on these mortgages as follows:

maximum realtor or mortgage broker commission on a sub-$500,000 transaction = $400
maximum realtor or mortgage broker commission on a $500,000+ transaction = $700

Considering that realtors and mortgage brokers have been a major part of the reason we are in this mess (we've all heard about the realtor who bought 10 properties during the runup only to foreclose on all 10 and the mortgage brokers who have lied on mortgage applications), I think these commissions are very generous.

It is beyond outrageous for the American taxpayer to be subsidizing the income of these two groups when these are the two groups most responsible for the current mess. I'll be composing a form email that people can send to their Congresspeople so that we can get the ball rolling on this. If you agree with me on this, you can join me in sending the email to our Congresspersons. It's definitely far beyond time to put a stop to the ridiculous subsidizing of realtor and mortgage broker income with taxper monies.

And just to be clear, I wouldn't want to put any restrictions on commissions generated from true free-market transactions. Only GSE/FHA transactions would need to be limited.

‹ Good RE for Sabre Springs/Poway area Condition of REDC and other foreclosures? ›
Why not regulate everything.
Submitted by fat_lazy_union_... on July 19, 2008 - 7:41pm.

Why not regulate everything. Let regulate the salaries or athletes. Let's regulate the salary of lawyers. If your business makes too mich money, let's regulate that too.

I use to recommend people who want to de-incentivize honest people making an honest living to move to a socialist/communist country like china. Well, even china doesn't work this way today

Here are three versions of
Submitted by equalizer on July 19, 2008 - 11:43pm.

Here are three versions of reality. Lets have a poll for Piggs to decide.

Version A:
Regulation is only for commies.
Its very obvious that democrats in CA,FL and NY passed state regulations that caused Countrywide, Indymac, Bear Stearns to fail. The free market regulators at federal exec level have been pro growth and have not interfered at all with these companies goal to help pay their employees and improve the US economy. Get rid of the FDIC audits, its just so quaint like the Constitution, it just hinders their growth to help rebuild America.

Dems are just bitter jealous people when they complain about CEOs getting paid 100 times avg employee salary while half the employees are fired and the stock drops 50%. Don't you think the Countrywide and BS CEO's deserve at least a $100M bonus for convincing the Feds to bail them out? Trust me, that 100M would be paid in consulting fees, etc anyway.

Without funding for new stadiums, teams have moved out and caused devastation for the cities. Witness LA, there is in a recession because the RAMS and Raiders left. Dems in Riverside and SB counties refused to build sports stadiums to lure in massive revenues and you have to wonder why the counties are in a massive recession. Why would anyone want to visit or live there without the sport stadiums and something to cheer about.

Version B:
More Regulation needed
Privatize all the profits, let taxpayers subsidize the Freddie Mac CEO's $20M pay last year, let the cities hand out free money to build stadium to subsidize billionaire athletes while parks and libraries close. Why is there not a 2 year waiting list to buy condos in downtown SD?

Bear Stearns, Indymac, Countrywide profits were not regulated, but now their losses are shared. By law, federal execs cant make more than Vice President, about 220K. FDIC execs running Indymac are paid 200K(?), while the former CEO was paid 8M after voluntary 50% pay cut(honest CEO). If you want to have federal subsidies, you better play by our rules, that is don't take outrageous risk and dont pay CEOs 100M.

Version C:
Ron Paul
The MLS is a monopoly that has been closed to outside groups after massive lobbying (in english read BRIBES) by realtor groups. Some states have been banned non-full service real estate agents. Felony for broker/agents to rebate commissions.

Fannie, Freddie are nothing but an extortion racket. Honest living. Lets let the readers ponder that Freddie Mac CEO's $20M pay last year, subsidized by taxpayers.

Close FDIC, Fannie, Freddie, etc. Get back to gold standard. Consumers can rely on smart/honest people at Moodys and S&P (or Weiss ratings) to help them avoid troubled firms.

fat_lazy_union_worker wrote:
Submitted by TheBreeze on July 20, 2008 - 1:47pm.

fat_lazy_union_worker wrote:
Why not regulate everything. Let regulate the salaries or athletes. Let's regulate the salary of lawyers. If your business makes too mich money, let's regulate that too.

I use to recommend people who want to de-incentivize honest people making an honest living to move to a socialist/communist country like china. Well, even china doesn't work this way today

All I want to do is regulate commissions on loans that are back-stopped by the taxpayers. I want to stop abuses like this where an FDIC insured institution like Downey Savings is offering a $50K commission to mortgage brokers:

http://mrmortgage.ml-implode.com/2008/07...

Who do you think is ultimately going to be on the hook for those 50K commissions? The Downey Savings executives? Hardly. The American taxpayer will be paying for those commissions retroactively when Downey is taken over by the FDIC.

You may consider it capitalism when mortgage brokers and realtors fleece the system while letting taxpayers pick up the bill once the system collapses. I actually consider that to be socialism and I think most of the American public would agree with me.

For those who are interested in emailing our representatives about this, I'll try to have the email done later tonight.

Funny stuff, equalizer. I'd
Submitted by justme on July 20, 2008 - 2:19pm.

Funny stuff, equalizer.

I'd go with Version B. In Version C,you were kidding about the ratings agencies being worth anything, right ? ;)

The MLS is a monopoly that
Submitted by ucodegen on July 20, 2008 - 4:03pm.

The MLS is a monopoly that has been closed to outside groups after massive lobbying (in english read BRIBES) by realtor groups. Some states have been banned non-full service real estate agents. Felony for broker/agents to rebate commissions.

I like this part of C.. The government has little business carving out a safe monopolistic niche for a corporation. It is actually supposed to do the opposite.

Close FDIC, Fannie, Freddie, etc. Get back to gold standard. Consumers can rely on smart/honest people at Moodys and S&P (or Weiss ratings) to help them avoid troubled firms.

FDIC, Fannie and Freddie have a purpose.. you don't want to try to live without them.

Going back to the gold standard will not work. There is a way to arbitrage between a fiat currency and a gold standard currency with the intent of reducing a country's gold reserves (suck the gold out of a country).

As for trusting the types like Moodys etc, just so long as there are real consequences to them (Moodys, S&P etc) misrepresenting for the purposes of gain (how about publicly flailing the CEO? Draw and Quarter the senior management?)

It seems like I differ on aspects for the Freddie and Fannie bailout. I see it simply: If public money is the lender of last resort (lender in posession) for Freddie and Fannie, the public owns Freddie and Fannie should they go bankrupt! Then all that has to happen is do the same thing that some turn-around firms (should) do, recapitalize Freddie and Fannie and sell off the shares of the 'new' company.. proceeds going to the public treasury.

On B:
The execs for Freddie and Fannie are not federal execs. Both of these entities are private. My simple plan is that as a penalty, the former execs of these companies are not allowed to run another company. They are to consider their golden parachute as the severance check.. Roadhouse style??

Quote:All I want to do is
Submitted by fat_lazy_union_... on July 20, 2008 - 9:24pm.

Quote:
All I want to do is regulate commissions on loans that are back-stopped by the taxpayers. I want to stop abuses like this where an FDIC insured institution like Downey Savings is offering a $50K commission to mortgage brokers:

http://mrmortgage.ml-implode.com/2008/07...

Who do you think is ultimately going to be on the hook for those 50K commissions? The Downey Savings executives? Hardly. The American taxpayer will be paying for those commissions retroactively when Downey is taken over by the FDIC.

You may consider it capitalism when mortgage brokers and realtors fleece the system while letting taxpayers pick up the bill once the system collapses. I actually consider that to be socialism and I think most of the American public would agree with me.

For those who are interested in emailing our representatives about this, I'll try to have the email done later tonight.

I think you're pointing the finger at the wrong problem. What got us into this mess started with the financial institution lax lending rules. I fail to see how regulating something as far upstream as realtors commision is really going to do anything. You want change, push for tighter lending standards. Well, i guess you really don't need to do this, since they are coming anyway.

I think we could survice
Submitted by equalizer on July 20, 2008 - 11:08pm.

I think we could survice without Fannie, Freddie and even the FDIC. Without the taxpayers subsidizing all the failures, the interest rates would go up 2% for best loans (more for others), but why subsidize bad loans, bad management so "innocent" parties in the RE Industrial complex can make great profits with no risk. Buffet would step up with his bank (WFC) and implicit guarantee that deposits are safe, credit unions with their conservative practices would flourish. See report from fed below:

http://www.frbsf.org/publications/econom...

Glad I got of out Moodys last year. Dont know why Buffet still holds 20% of shares, it is a company without any ethics. They ZERO accountability for their ratings. They can not be sued, they have hold harmless clause. They could have given Indymac AAA+ and they would downgrade the day after FDIC takever with NO consequences. WHY? Because pension funds, mutual funds dont give a hoot, its not their money. Since they are compared to peers, they can say well everyone was hurt, not my fault, business as usual. Fidelity and other mutual funds don't vote on shareholder resolutions, etc.

To reiterate what I think is
Submitted by denverite on July 21, 2008 - 5:32pm.

To reiterate what I think is the point of the post - BREAK UP the real estate MONOPOLY, again, BREAK UP the MONOPOLY. The MLS is a PROTECTED, UNREGULATED MONOPOLY.