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Yet Another Late and Useless Government Action
This new rule reminds me of a dog chasing its tail!  Ed Gillespie has taken the time to explain the "new" mortgage rules that become effective in April, 2011.
Well, it sounds noble enough.
"The Federal Reserve Board on Monday announced final rules to protect mortgage borrowers from unfair, abusive, or deceptive lending practices that can arise from loan originator compensation practices."
Too bad this didn't get done several years ago!  But at least the announcement states that the rules apply equally to bank loan officers.
The new final rules say that a loan originator cannot be compensated through Yield Spread Premium (which is paid by the lender) based upon the interest rate or other loan terms.  This is kind of amusing since, as of January 1, 2010, the new Good Faith Estimate (GFE) 2010 form gives the Yield Spread Premium amount to the borrower to use toward closing costs.  I guess the Fed folks missed all of those Webinars and PowerPoints HUD prepared last year about the GFE 2010.
Originators can only get their compensation directly from the borrower.  The amount is commonly based on a percentage of the loan amount.  That's been on the new GFE since January 1, too.  ... more

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