Fed Releases New Rules on Yield Spread Premiums, Loan Disclosures

On August 16, the Federal Reserve issued final rules on loan originator compensation and steering (yield spread premiums), home-secured credit (reverse mortgages) and notification of mortgage loan sales or transfers.

Yield Spread Premiums: The new rules would no longer allow loan originators to receive compensation based on the interest rate or the terms of the loan. Loan originators can continue to receive compensation that is based on a percentage of the loan amount. The final rule also prohibits a loan originator that receives compensation directly from the consumer from also receiving compensation from the lender or another party. The final rule becomes effective April 1, 2011. Click here for more information.

Notification of mortgage loan sale/transfer: Rules, which would take effect January 30, 2011, requires consumer to be notified when their mortgage loan has become sold or transferred. Lenders must also provide new detailed information to borrowers about the rate and terms of a loan. The rule implements a statutory change to TILA that was enacted in May 2009 and applies to all loans secured by a consumer’s home. Click here to view the rule.

Home Secured Credit: The rules are designed to improve the disclosures consumers receive for reverse mortgages and ensure consumers receive new disclosures receive when they agree with their lender to modify key terms of a closed-end mortgage. Click here for more information.

If you are a member and have questions, contact MHI Vice President of Government Affairs Jason Boehlert at jboehlert@mfghome.org.

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