Feds scuttle mortgage brokers' 'YSP' compensation

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Critcs say "yield spread premiums" often targeted minority and lower-income households, they were tacked onto 75 percent of all subprime loans made by mortgage brokers and they pushed total loan costs up by an average $3,000.

by Broderick Perkins
© 2010 DeadlineNews.Com

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Deadline Newsroom - New federal rules have scuttled mortgage broker compensation often earned by steering consumers to costlier mortgages, but brokers say the rules could end up costing consumers elsewhere.

Effective April 6, 2011 with an amendment to Regulation Z, which implemented the Truth in Lending Act, mortgage brokers and loan originators lost the right to compensation based on a borrower’s interest rate or other loan terms.

The Federal Reserve order could save consumers thousands of dollars on a mortgage, that is, if brokers’ predictions about higher loan costs don’t materialize.

The most controversial compensation the order targets is was what was known as “yield spread premiums” or YSPs.

• Get the full story from MortgageMatch.com: "Will New Mortgage Broker Compensation Rules Save Consumers Money?"

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Broderick Perkins, an award-winning consumer journalist, parlayed 30 years of old-school journalism into a digital real estate news service, the San Jose, CA-based DeadlineNews Group, including DeadlineNews.Com, a real estate news and consulting service and Web site, and the Deadline Newsroom, DeadlineNews.Com's news back shop.

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Perkins is managing editor of HomeAway.com's Gulf Coast Response Center.

Perkins was the first Examiner to cover three beats for the Examiner.com news service:
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