Brokers Propose Alternative to YSP Ban

Mortgage brokers are urging the Federal Reserve Board to withdraw a proposed rule that would regulate broker compensation and delay any action until Congress finalizes pending consumer protection legislation. The National Association of Mortgage Brokers said the Fed has not met the standard for determining that the payment of yield-spread premiums to brokers is an "unfair and deceptive" practice. "Such a determination should be made, if it is to be made, by Congress, not the board," NAMB says in a comment letter on the Fed's Truth in Lending Act proposal. Under the proposed TILA rule, compensation based on increases in the interest rate or changes to other loan terms would be prohibited. The Fed suggests that loan officers and mortgage brokers could be compensated based on a set percentage of the loan amount. As an alternative, NAMB suggests a mortgage brokerage business could receive secondary market fees and compensate the brokerage's LOs based on a percentage of the loan amount. "NAMB strongly urges the board to explore this proposed alternative ... prior to finalizing any rule," the trade group says.