Industry NewsMortgage

Dems target incentives for loan originators

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House Democrats have introduced legislation that supporters say would remove incentives for mortgage brokers to place borrowers in higher-cost loans, and require lenders to retain some exposure to riskier loans that are securitized and sold to secondary-market investors. HR 1728, the Mortgage Reform and Anti-Predatory Lending Act of 2009, is a sweeping bill that would address many other aspects of the loan origination, securitization and servicing process, including the creation of a "federal duty of care" for all mortgage originators, prohibitions on certain prepayment penalties, and protections for tenants of foreclosed homes. Among the provisions likely to generate the most controversy is language that would prohibit mortgage originators from receiving yield-spread premiums or other compensation that critics say serve as incentives for them to steer borrowers into more costly loans. Proponents of yield-spread premiums -- rebates paid by lenders when borrowe...