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Showing posts from August 17, 2010

FED BANS YIELD SPREAD PREMIUMS

On Monday, the Federal Reserve Systems' Board of Governors issued a final rule that places strict new limits on the way in which mortgage loan originators can get paid.

The new order:

Prohibits lenders from paying originators added compensation when borrowers agree to accept higher interest rates or other loan terms than they might otherwise qualify for  (the yield spread premium or "YSP").Disallows originators receiving compensation from lenders or other third parties if the borrower pays them too, andMandates that originators not "steer" consumers to loans that increase originator compensation but that are not in the consumer's best interest. Consumers have long been at risk when dealing with loan originators who are compensated based on the terms of the loans offered. Loan officers, having superior knowledge about various loan programs were often offered very lucrative inPublish Postcentives (i.e. more money) if they could convince (or mislead) borrowers …