A Letter to the Editor: A Big Thank You to HUDCharles W. BradleyHUD, YSP, clarifies, Mel Martinez
A Letter to the Editor
A Big Thank You to HUD
As the president of a mortgage banking firm, I am pleased that
HUD has taken a bold step toward doing the right thing for the
mortgage industry and homeownership in America.
HUD's Statement of Policy 2001-1 clarifies their long-standing
position that the payment of yield spread premiums are not per
se illegal. Mortgage professionals should be particularly
pleased that HUD Secretary Mel Martinez and his staff have
recognized the usefulness of YSPs as a financing tool for borrowers
that lack the necessary funds to pay for settlement costs up-front.
The payment of a YSP by the lender permits a borrower to finance
services, such as all or a portion of a Mortgage Broker's fee,
through a higher interest rate.
We should further applaud HUD for clarifying its two-pronged
test which determines whether lender payments to Mortgage Brokers
are legal under the Real Estate Settlement Procedures Act. The exam
now requires that all compensation to the Mortgage Broker, not just
the YSP, must be considered on a loan-by-loan basis, and not
through class action litigation.
We hope this clarification will provide much needed leadership
on this issue, and help stem the tide of threatened litigation that
many experts predicted would greatly harm the mortgage lending
industry. It is rare for any governmental agency to willingly step
forward and do the right thing in the face of intense criticism,
and I thank Secretary Martinez for having the guts to tackle this
Charles W. Bradley, Chairman, CEO
EquiFirst Corporation, Charlotte, N.C.