Wednesday, March 16, 2011

Repubs defend helpless lenders against big bad loan originator compensation rule.

These House Financial Services Republicans are anxious to prevent "bailouts" when the consumer might benefit. But when it comes to restraining lenders' fees, they're only too happy to pull for the bankers.

So Reverse Mortgage Daily reports that Spencer Bachus, R-Ala., chair of House Financial Services, has sent a letter signed by 31 of his House colleagues asking the Federal Reserve to put off enforcing a new rule meant to limit sneaky fee-grabbing and perverse profit incentives on home mortgages.

Back in August the Federal Reserve issued a final rule (text here) against "payments to loan originators, which includes mortgage brokers and loan officers, based on the terms or conditions of the transaction other than the amount of credit extended." Among other things, it's designed to stop setups that pay the mortgage salesman extra for talking the borrower into a higher interest rate.

The rules take effect April 1, 2011, hence the current uproar. Apparently the bankers and lenders find all that fine print in the new rule too confusing. I guess they would know what confusing fine print can do to people.

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