Skip to main content

CRL urges fed to ban mortgage kickbacks
Dec 28, 2009

The Center for Responsible Lending (CRL) has recommended that the Federal Reserve Board strengthen a proposal to ban routine kickbacks for steering borrowers into unnecessarily risky or expensive home loans. In recent years, these kickbacks (often called "yield-spread premiums") have cost consumers billions of dollars. If finalized as proposed, the kickback ban would apply to mortgage brokers, loan officers, and any party that originates mortgages for lenders who fund the loans. "The Federal Reserve has proposed to correct a direct conflict of interest between consumers and lenders, one that fueled the dangerous lending that triggered the housing crisis," said Kathleen Keest, senior policy counsel for CRL. "Many people are still wondering why so many bad loans were made. A big part of the answer is yield spread premiums. These kickbacks are easy to hide from consumers, and they encourage brokers to aggressively market the worst kinds of loans—even when their customers qualify for better." In research released in 2008, CRL analyzed nearly two million mortgages and found that people with weaker credit paid significantly more for mortgages originated by brokers rather than directly by lenders. On mortgages made between 2004 and 2006, we estimate that borrowers paid almost $20 billion in extra interest on loans they received from brokers. Much of that excessive cost is attributable to yield spread premiums. The Federal Reserve Board's deadline for accepting comments on its proposal related to yield-spread premiums recently passed, which is included in a broader proposal to amend the Truth-in-Lending Act (Regulation Z). With some strengthening provisions, CRL strongly supports the amendment that would prohibit lenders from tying bonuses to the terms and conditions of the loan. CRL's comment letter notes that nothing in the proposed rule would prevent lenders from offering appropriate compensation to brokers and other loan originators. The letter says, "There will still be room for creditors to offer incentives to originations to deliver quality loans. And originators can still be fairly compensated for their work." Among the recommendations included in CRL's comments to strengthen the proposal: ► Do not permit lenders and brokers to split origination costs between up-front fees and higher interest rates. ► If a yield spread premium is paid, the lender who pays it should accept legal accountability for any lending misconduct by the broker. ► The proposal on compensation should apply to the entire mortgage market, including home equity lines of credit. ► The final rule should encourage lenders to provide monetary incentives for loan originators to deliver high quality, sustainable loans. For more information, visit 
Dec 28, 2009
Mortgage Forbearance Changes Create Challenges for Servicers

65% Of All Plans Would Expire By The End of 2021

Regulation and Compliance
Aug 02, 2021
CFPB Reports Trends In Financial Assistance

The latest developments from this study reveal that most consumers have exited the payment assistance they received at the start of the pandemic.

Analysis and Data
Jul 14, 2021
CFPB Orders GreenSky To Refund $9M In Unauthorized Loans

The consent order requires GreenSky to refund or cancel up to $9 million in loans for the customers harmed by this illegal conduct.

Regulation and Compliance
Jul 13, 2021
CFPB Warns Landlords And Consumer Reporting Agencies To Report Accurate Rental Information

Inaccurate rental or eviction information can unfairly block families and individuals from safe, affordable housing.

Regulation and Compliance
Jul 01, 2021
FHFA Mandates Quarterly Fair Lending Reports

FHFA issued orders for all enterprises to submit quarterly Fair Lending Reports with data and information to improve the FHFA’s capabilities. 

Regulation and Compliance
Jul 01, 2021
FHFA Follows CFPB To Protect Borrowers Once COVID-19 Foreclosure And Eviction Moratoriums End

The Federal Housing Finance Agency made it clear that Fannie Mae and Freddie Mac servicers are not permitted to make first notice or filing for foreclosure that would be prohibited by the CFPB protections for borrowers affected by COVID-19.

Regulation and Compliance
Jun 30, 2021