AFSA Spotlights YSP-Linked Liability Issue

The American Financial Services Association says it could support the Federal Reserve Board's HOEPA proposal for dealing with yield-spread premiums if lenders are not held responsible for a mortgage broker's actions. The Home Ownership and Equity Protection Act proposal requires brokers to negotiate their fee in a dollar amount with the borrower upfront before an application fee is charged and to provide the lender with a signed document. Lenders are expected to rely on this document in paying the YSP to the broker. However, AFSA points out that the lender would not know when it was signed and could be liable if it is not signed and dated contemporaneously. "AFSA asks that the Board clearly and unambiguously remove liability from the lender for things that the broker controls," AFSA executive vice president Bill Himpler says in a comment letter. The Consumer Federation of America is asking the Fed to prohibit YSPs on subprime mortgages. "Negotiating fees up front is good, but it still leaves opportunities for abuse," CFA housing and credit policy director Allen Fishbein told MortgageWire.