Rebates to mortgage brokers rile regulators

Future-Proof: Navigate Threats, Seize Opportunities at ICNY 2018 | Jan 22-26 at the Marriott Marquis, Times Square, New York

(This is Part 2 of a three-part series. Read Part 1, "New mortgage underwriting rules will be tough to enforce.") Last week, I criticized the Federal Reserve Board's proposed rule to prohibit lenders from making loans that were not affordable, and to require lenders to verify the information on which they base loan decisions. These rules are too vague to be enforceable, and it is too late for them to do any good even if they were enforceable. This week I look at the board's proposed approach to curbing abuses by mortgage brokers. Timeliness is not an issue here, but doing it right is. Mortgage brokers abuse borrowers when they collect a rebate from the lender for delivering a high-interest-rate loan without the knowledge of the borrower. I developed the Upfront Mortgage Broker program largely to deal with this problem. Upfront Mortgage Brokers (UMBs) agree in writing with borrowers to a specified total fee, which includes any payment received by the broker from the lender...