Industry News

April 9th, 2009 12:58 PM

The House Financial Services Committee on this week will mark up a mortgage reform bill that bans certain types of yield spread premium payments and requires lenders to retain 5% of the credit risk on subprime loans that are sold to investors. The sponsors want to crack down on compensation that might encourage lenders and brokers to steer borrowers into higher cost loans. "Specifically, the new measure will strengthen restrictions on compensation paid to originators and brokers that is based on a loan's rate and terms, often called a yield-spread premiums," according to Rep. Miller. Marc Savitt, president of the National Association of Mortgage Brokers told National Mortgage News that he is okay with the language in the bill, noting that "this doesn't ban yield spread premiums outright" and instead "prevents people from making a couple of extra points" by putting consumers in higher cost loans. Mr. Savitt added that his reading of the bill indicates that it would require banking firms to disclose their "servicing released premiums" to the public as well. "The bill means you have to disclose everything," said Mr. Savitt. The legislation also mandates that all licensed and registered originators would be subject to a "federal duty of care" measure under the bill, obligating them to only make loans that a customer can afford. With refis, lenders would have to prove a "net tangible benefit." Source: National Mortgage News

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