House bill targeting payments to brokers unenforceable

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(This is Part 2 of a two-part series. Read Part 1.) YSP abuse, as explained in my first column, arises when mortgage brokers steer borrowers into high-rate loans on which the broker collects a rebate from the lender, without the knowledge of the borrower. To eliminate it, I suggested a simple and easily enforceable rule that would help the naive as well as the informed borrower. The rule is that lenders must credit all rebates to borrowers. The borrowers would then have to authorize the payment to brokers. One of the important objectives of The Mortgage Reform and Anti-Predatory Lending Act of 2007 (HR 3915), which passed the House of Representatives Nov. 15, is to prevent YSP abuse. Will it? The first version of the bill that I looked at would indeed have prevented YSP abuse, but it also would have eliminated mortgage brokers. The version passed by the House, modified after inputs were received from brokers, would not put them out of business, but neither would it prevent YSP abuse. ...