This is amazing!
The FEDs require full disclosure and fiduciary responsibility for any money-related transaction with clients EXCEPT in the case of mortgage brokers.
They are not required to disclose UPFRONT how much they are making on the YIELD SPREAD PREMIUM, a payment made to the loan originator which normally just gets buried as a footnote in the HUD statement. And loan officers employed by lending institutions are not required to disclose it at all!
This has allowed unscrupulous mortgage brokers and lenders to steer unsuspecting borrowers into more expensive loans, to earn a larger commission on the loan, beyond what a 'reasonable" commission should be.
According to CNNMoney.com. the new Federal Reserve's lending rules released last week do nothing to stop this practice! They dropped their proposed ruling on yield spread because they feared "people would be confused by it" and disclosing broker fees upfront would cause borrowers to think it would be cheaper to go directly to the lenders (which is not the case usually). It seems to me like a case of heavy lobbying on behalf of the associations of mortgage brokers.
As REALTORS, we owe a fiduciary responsibility to our clients to act in their best interest. We should be involved in the loan application process to make sure our clients are not abused.
The problem is that not every client wants our help in this regard. I recently had a client who was charged outrageous fees in yield spread, from a mortgage broker "friend" (what a friend!) and when I questioned the charges, my client got upset with ME for questioning the integrity of his friend! Talk about absurdity!
Why don't they require the same fiduciary responsibility from lenders and mortgage originators that they require from REALTORS?