Fed: YSP Ban Possible

The Federal Reserve Board may place restrictions on yield spread premiums because it is too difficult to explain to consumers how they are used to compensate mortgage brokers. The Fed's director of consumer affairs Sandra Braunstein told a House panel that YSPs are a very complex concept and the Fed's attempt at YSP disclosures has not worked well under consumer testing. "We are considering other options — restrictions on yield spread premiums and potentially bans on YSPs," Ms. Braunstein testified. "Everything is on the table," she added. Officials at the National Association of Mortgage Brokers doubt the Fed will ban YSPs. "If they are going to ban yield spread premiums, they need to ban any indirect compensation received by any person in the mortgage distribution channel," said NAMB executive vice president Roy DeLoach. The Fed is expected to issue a proposed rule this summer to improve its Truth in Lending Act mortgage disclosures and address the YSP issue.