Skip to main content

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:

  1. 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").
  2. Disallows originators receiving compensation from lenders or other third parties if the borrower pays them too, and
  3. Mandates 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 to take higher-cost loans. The Fed's action will now require lenders to at least show borrowers the cheapest costing loans and lowest interest rates available to them. 

The new rule does not go into effect until April, 2011
Labels:

Comments

Post a Comment

Popular posts from this blog

PLM Title Shuttered

Title insurance is a critically important part of any real estate transaction; or at least it should be. The title company guaranties the "quality" of an owners interest in the property - that there aren't any (unknown) liens or defects. No buyer that I work for will purchase a property without it. Title insurance is only as good as the insurer. We want to know that the insurance company, like the Rock of Gibraltar , will always be there. We want to sleep easy at night, knowing that the client is protected. That said, it was a bit distressing to see that PLM Title Company shut its doors, without any forewarning last week. Worse still, this morning's news is that there is a criminal investigation underway - and that we do not yet know why. Old timers like me shudder with memories of the great Intercounty Title debacle five years ago. Here's to hoping that this one is nothing like that one. Set aside the problems involved trying to make a claim against a defun...
6 comments
Read more

FHA Loans and Condo Sales - Is Relief on the Way?

By all outward appearances, state government in Illinois has ground to a complete halt, with all eyes focused on the Governor's "problem" and all the related fal - der -rah. Its hardly business as usual in Springfield, but not everything has ground to a halt. Several new bills have been introduced this week. That is not to say that they will be of benefit to we the people. Nonetheless, the cogs and gears are turning, and we are hoping for the best. One such proposal comes from Rep. LaShawn Ford of Chicago's west side, who is himself a real estate broker and entrepreneur . He is the author of House Bill 155 , introduced & referred to the Rules Committee Wednesday. It seeks to address one of the most common problems I am seeing in condominium resale transactions these days; the tension between many Declarations of Condominium and FHA loan guidelines. Many Condo Declarations provide Associations with a "right of first refusal," which basically allows t...
3 comments
Read more

Six Ways That Unsolicited Purchase Offer Might Not Be As Great A Deal As You Hoped For

by Michael H. Wasserman Flippers. Wholesalers. I-buying fin-tech disrupters. Publicly traded REITS. Private equity firms. Boot-strap investors. All out on the prowl for opportunities. It's never been easier for Chicago area owners to sell homes directly. But should you? What can possibly go wrong? Read on to learn the unpleasant truth, and the things you can do to make the most of these no-broker deals. It may start with a series of unsolicited offers. Out of the blue. First a letter. Then another. (Look – this one's on yellow stationary!) A note left in the mailbox. A knock at the door. Maybe the allure of those ads on tv and the net. That billboard you keep driving past. Same deal. "We'd like to buy your house. Just us. No middlemen. No realtors. You won't have to pay anyone's commission. We can pay all cash. Close in two weeks if you want. What do say"? The money sure would be nice. More house than you need. Getting harder to keep it up. Money i...
Post a Comment
Read more