BrokerageIndustry News

Mortgage brokers sue to block RESPA

Treatment of yield-spread premiums at issue

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The National Association of Mortgage Brokers is going to court to block implementation of changes to the Real Estate Settlement Procedures Act (RESPA), saying the Department of Housing and Urban Development failed to assess the impact on small businesses.HUD's RESPA rule changes include a standardized Good Faith Estimate (GFE) form, which requires the disclosure of yield-spread premiums paid by lenders when borrowers take out loans with higher interest rates. The GFE also requires that the rebates be credited to borrowers. Critics have said that mortgage brokers often pocket yield-spread premiums without the knowledge of borrowers, providing an incentive for them to place clients in higher-cost loans. As long as brokers don't pocket the rebates, yield-spread premiums can help borrowers who choose to take out a higher-cost loan to cover their closing costs, HUD said in drafting the new rules. The new GFE doesn't identify yield-spread premiums by name, but would require mortgage brokers ...