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With New Fed Rules, Mortgages More Likely to Have a Fair Price

Friday, April 1, 2011

Today marks the end of a long and notorious era in lending history, as new Federal Reserve rules take effect to stop mortgage kickbacks. For years, mortgage brokers and loan officers could charge different borrowers different prices for mortgages, even when borrowers had the same qualifications. By steering some customers into unnecessarily riskier and more expensive loans, mortgage brokers often pocketed thousands of dollars in extra pay.

CRL research confirms that borrowers typically have paid more for brokered loans, especially on subprime mortgages. Almost 75% of all subprime mortgages made by mortgage brokers came with a "yield-spread premium"—essentially a kickback brokers received for boosting the interest rate and adding riskier terms to home loans.

Now this type of pricing discrimination is history, and brokers' compensation can't be tied to interest rates or loan terms that are likely to increase the risk of default. As the foreclosure situation remains grim and the housing market struggles to recover, this is a most welcome milestone that will make a big difference to future home buyers.

Find Out More

"Steered Wrong: Brokers, Borrowers and Subprime Loans" (CRL research on broker compensation)

Yield-Spread Premiums

For more information: Kathleen Day at (202) 349-1871 or kathleen.day@responsiblelending.org; Ginna Green at (510) 379-5513 or ginna.green@responsiblelending.org; or Charlene Crowell at (919) 313-8523 or charlene.crowell@responsiblelending.org.