Archive for May, 2007
Why Does the Lending Industry Cross the Line?
May 3rd, 2007 Categories: Mortgage News
Because it can.
The number one statement that I get via comments and emails from others in the mortgage industry (paraphrased):
What a telling statement, as it confirms the general broker/bankers desire to keep valuable information hidden or buried deep in documents. It also tells me that they don’t understand the laws surrounding the mortgage industry. A financial services provider, especially one providing and selling mortgage advice and programs, are bound by far different rules than your local Wal-Mart or McDonald’s. Some of these laws were referenced a recent post, so I’ll spare repeating them.
YSP’s always get drug into these discussions, mainly because they are almost always the tool used to create personal enrichment for the brokers/bankers that could be deemed as illegal kickbacks. When wielded in such fashion, YSP’s are in direct conflict with the potential borrowers interest. Although Ive stated YSP’s black letter law definition before:
Yield Spread Premiums are to be offered as an option to the borrower as a tool to finance some or all of their closing costs.
So fellow mortgage peeps, it really is the consumers business what you are making on their transaction, sorry. Charge what you want, but receiving undisclosed monies from a 3rd party to the transaction is called a ‘kickback’ and illegal according to H.U.D.
Well, if this is so, why and how does business still go on like this?
- There is alot of ambiguity revolving around YSP’s (good or bad) due to their ‘case by case’ nature. Determining if they were used properly or as an illegal kickback is a highly subjective process. This is the #1 reason a bell ringing class-action suit (although tried) hasn’t been successful thus far. To achieve ‘class&#