The Federal Reserve adopted new standards that ban yield spread premiums on mortgages, a practice that critics say led to homebuyers being saddled with unfairly high mortgage rates.

The premiums involve lenders paying a bonus to mortgage brokers who brought them customers willing to pay high-interest rates on loans, The New York Times reported. Critics say this practice led to brokers forcing high-interest loans on borrowers, telling them it was the best deal they could get.

"People didn't just happen to end up in risky loans," Michael D. Calhoun, president of the Center for Responsible Lending, told The New York Times. "Mortgage brokers and other people on the frontlines were getting two to three times as much money to push buyers into those loans than they were into 30-year fixed-rate loans. So what do you think happened?"

The new rules, which come into effect in April, ban making payments to a lender or broker based on the loan's interest rate. The borrower must also be provided with other options, including the lowest-qualifying interest rate.

The new rules still allow for compensation based on a fixed percentage of the loan amount.

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w.jerico

I am always on the lookout for quality posts and articles so I suppose I am lucky to have found this! I hope you will be adding more in the future.


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July 28 2013 at 6:06 AM Report abuse rate up rate down Reply
vanmaninde

only bad if yor a member of AFSCME in de.then the top is bought off

August 17 2010 at 7:22 PM Report abuse rate up rate down Reply
wurkinman1

Yeah..like how about not letting prisoners apply and get millions of dollars of tax credit for first time homebuyers...and you couldnt even tell they were doing it...wake up government...my kids control their money better than you control ours..and by the way..since i paid my mortgage on time..and therefore didnt get a shot at those very low interest rates, and kept my job so i didnt get an extnded unemployment check (what is it now 2 years ? )..therefore I wont get that $50,000 GIFT to homeowners who are behind in their mortgage and are unemployed...I have one question...WHAT THE HELL DO YOU GET....WHEN YOU DO EVERYTHING RIGHT ?? asidr from SCREWED..answer me that

August 17 2010 at 2:52 PM Report abuse +1 rate up rate down Reply