Mortgage reform targets excessive costs

Many borrowers duped into taking loans with higher rates

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Of all the issues that have bedeviled regulators and legislators dealing with consumer protection, perhaps the most troublesome have been abuses connected to mortgage loan originator compensation. Most reform proposals have been directed at abuses by mortgage brokers, and don't apply to loan-officer employees of lenders. And many of the less thoughtful proposals for curbing broker abuses would eliminate the borrower's option to have the lender pay the broker's fee in exchange for a higher rate. I am pleased to report that the recent proposals of the Federal Reserve to amend the Truth in Lending Act (TILA) deal with abuses by loan officers as well as brokers. In addition, the revised TILA would retain the option borrowers now have in how they pay mortgage brokers. Loan originators (henceforth LOs) are those individuals who deal directly with borrowers. The problem is not how much LOs make, but how they make it. Under existing arrangements, LOs can often increase their income...