CRL: Brokers Costlier Than Lenders for B&C

In its latest study, the Center for Responsible Lending maintains that subprime borrowers pay significantly more for getting a loan from a mortgage broker than from a retail lender. The study, "Steered Wrong: Brokers, Borrowers and Subprime Loans," looked at more than 1.7 million mortgages originated from 2004 to 2006. The data included credit scores and borrower's equity, but only back-end fees. It did not include upfront fees paid by a consumer to a lender. At a news conference to discuss the study, co-author Brian Ernst said the typical subprime borrower pays $5,222 more in the first four years of a $166,000 mortgage than a similar borrower who received a loan directly from a lender. The CRL attributes the disparity to yield-spread premiums and prepayment penalties. In the prime world, Mr. Ernst said, there is more competitive pricing between loans originated by mortgage brokers and those originated in the retail channel. One of the reasons for the difference, he said, is that in the subprime arena, brokers can give a higher price to a less knowledgeable borrower.