Panel Passes 'Predatory' Bill; Could Hurt YSPs

Late Wednesday night the House Financial Services Committee passed predatory-lending legislation that could put a crimp in yield-spread premiums, a key component of how loan brokers are compensated.The National Association of Mortgage Brokers is concerned that a section of the bill that bans "incentive payments" to brokers also bans all YSPs. Rep. Gary Miller, R-Calif., proposed an amendment to clarify that YSPs are permitted if the broker's fee is disclosed early in the process and if the fee is not changed based on the consumer's decision to finance certain closing costs. Rep. Barney Frank, D-Mass., the committee chairman and sponsor of the bill, said the ban on incentive pay is designed to prevent brokers from steering borrowers into higher-cost loans. Among other things, the bill imposes standards on the origination and securitization of subprime loans. (For full details, see the Nov. 12 issue of National Mortgage News.)