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January 11, 2012

Federal Reserve and FHA Looking for Safer Loans in 2012?

Category: Federal Reserve,FHA – admin – 12:51 am

The Federal Reserve has received a lot of heat in the last few years for committing to back so many bad mortgages.  The Federal Housing Administration has increased monthly mortgage insurance premiums several times in the last few years. The increased premium helps to bolster FHA reserves, but it definitely decreases affordability for borrowers because FHA mortgage loan payments increase when mortgage insurance premium rises.  FHA refinance rates have made head-line news all year. Rates continue to be available at 60-year lows, below 4% on thirty year terms.

Today, the Fed announced that it contributed $76.9 billion in profits to the Treasury Department last year, slightly less than its record 2010 transfer but much more than in any other previous year.  The Fed is required by law to turn over its profits to the Treasury each year, a highly lucrative byproduct of the central bank’s continuing campaign to stimulate economic growth.

Nearly 97% of the Fed’s income was generated by interest payments on its investment portfolio, including $2.5 trillion in Treasury securities and mortgage-backed securities, which it has amassed in an effort to decrease borrowing costs for businesses and consumers by reducing long-term interest rates.  Through those purchases, the central bank has become the largest single investor in federal debt and securities issued by the government-owned mortgage finance companies Fannie Mae and Freddie Mac. As a consequence, most of the money flowing into the Fed’s coffers comes from taxpayers. See more first time home buyer programs from FHA.


August 17, 2010

Federal Reserve Cuts Lender Paid Yield Spread Premium

The Federal Reserve was busy Monday eliminating commission opportunities for mortgage brokers across the nation. The Fed announced several new rules like banning YSP loan commissions in an effort to minimize abusive mortgage lending practices.  According to the Lead Planet, a mortgage marketing company in Southern California, the Fed actually said that mortgage lenders paying yield spread premium, also known as YSP led to the collapse of our housing sector.   The truth is that the Fed has had knowledge of broker paid commissions since it began well over a decade ago.

Will Banning Mortgage Rebates Help the Mortgage Industry?

These new home lending regulations are part of the new financial reform legislation mandated by Congress.  The new rules apply to mortgage loan originators, brokers and loan companies, including banks and mortgage firms employing them. Under the new regulations loan originators may no longer be paid a increased commissions for suggesting one home loan over another.

Will this be the end of No Cost Mortgages? The rule change is intended to prevent loan originators from receiving higher compensation at the cost of damaging consumers.  Mortgage lenders can still continue to receive fees that are based on a percentage of the loan amount, however, which is common in the mortgage business.  Many loan originators have been sharing their yield spread premium commissions with their borrowers in an effort to reduce or even eliminate closing costs.  Where do you think no cost mortgage loans originated from?

Loan originators will also be prohibited from receiving compensation from both the consumer and another party such as a bank or mortgage company. Consumers were typically not informed that loan originators and brokers often received payments for their work from both parties. The new rule seeks to protect consumers who agree to pay the loan agents through a higher interest rate or through fees such as points charged up front on a mortgage are not paying more as a result.

Another rule finalized Monday would require borrowers to be notified when their home mortgage has been sold or transferred.  The Fed also proposed a rule to make it easier for consumers to learn who owns their loans. Under the provision, once a mortgage servicer is asked by a borrower for that information, the loan servicer would have to provide it within a reasonable time, which generally would be 10 business days.

The new YSP rules are set to go into effect April 1, 2011.  Read the original article online > Fed Bans Lenders from Paying YSP to Mortgage brokers