Consumer groups are reminding the Department of Housing and Urban Development that RESPA reform also means regulating mortgage broker compensation so that consumers know up front how much they are paying the broker in a loan transaction.The yield-spread premiums that brokers receive from wholesale lenders are simply "kickbacks," which Congress "sought to forbid" when it enacted the Real Estate Settlement Procedures Act 30 years ago, according to a letter by seven consumer groups. To curb "abusive" YSPs, HUD should require brokers to enter into a written agreement with the borrower that discloses the broker's total compensation. In addition, the April 6 letter to HUD Secretary Alphonso Jackson says borrowers should be given choices regarding how they will pay that fee at closing. HUD officials are working on a RESPA reform proposal, which might be issued for public comment this summer. The National Association of Mortgage Brokers opposes YSP disclosures unless lenders are required to disclose the back-end fees (gain-on-sale margins or servicing-release premiums) they receive in loan sales.
