Industry NewsMortgage

Fed may ban loan-originator incentives

Overhaul of TILA loan disclosures also on tap

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The Federal Reserve Board is proposing a ban on incentive payments to mortgage originators that are based on a loan's interest rate or other terms, and revisions to loan disclosures provided to consumers that would include factoring in the cost of settlement services such as title insurance.The Fed says its proposed changes to Truth in Lending Act (TILA) loan disclosure forms would make them more compatible with another set of disclosures mandated by the U.S. Department of Housing and Urban Development under the Real Estate Settlement Procedures Act (RESPA).But the Fed's revisions, if finalized, would still fall short of meeting calls by the lending industry and lawmakers for regulators to draw up a single loan disclosure form that meets both TILA and RESPA requirements (see story).The Fed's proposal to ban some types of incentive payments to mortgage originators may also prove controversial, as the ban goes beyond new restrictions on "yield-spread premiums" proposed by HUD u...