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Published: February 2013

Regulating creditor-paid broker compensation protects consumers from risky loans

There has been a long history of mortgage brokers putting borrowers into more expensive and riskier loans in order to earn larger creditor payments. Such practices were particularly pronounced in the lead-up to the financial crisis, but remain a concern even after passage of Dodd Frank. Consumer Action and advocates address the question of how the Consumer Financial Protection Bureau (CFPB) should apply the revised points-and-fees definition to creditor-paid broker compensation regarding Qualified Mortgages (QM).

The CFPB issued a final rule in January 2012 regarding Qualified Mortgages. Several issues were addressed, including treatment of mortgage originator compensation. However, Consumer Action joins the coalition to urge the CFPB to include more mortgage protections in its final rule, including the creditor-paid broker fees. These fees provide a critical protection and counter balance to harmful incentives that have lead to the overcharging and targeting of borrowers to more expensive and riskier loans than they qualify for. It also puts the less transparent creditor-paid broker fees on par with the clear upfront broker fees, which are fully included in the points and fees determination. We urge the Bureau to implement and enforce this critical protection as it is set out in the Dodd-Frank statute.


Lead Organization

Americans for Financial Reform (AFR)

Other Organizations

AFL-CIO | Alliance for a Just Society| Americans for Financial Reform | California Reinvestment Coalition | Center for NYC Neighborhoods | Center for Responsible Lending | Connecticut Fair Housing Center | Consumer Action | Consumers Union | Cypress Hills Local Development Corp. | Empire Justice Center | ESOP: Empowering and Strengthening Ohio's People | Greenlining Institute | Inland Fair Housing and Mediation Board | JASA/Legal Services for the Elderly in Queens | Legal Services NYC | Long Island Housing Services, Inc. | NAACP | National Association of Consumer Advocates | National Consumer Law Center (on behalf of its low-income clients) | National Council of La Raza | National Fair Housing Alliance | National People's Action | NEDAP | Pratt Area Community Council | Public Counsel | South Brooklyn Legal Services | Staten Island Legal Services | The Leadership Conference on Civil and Human Rights | Westchester Residential Opportunities Inc. | Western New York Law Center, Inc | Woodstock Institute

More Information

For more information, please visit the AFR website.

Download PDF

Regulating creditor-paid broker compensation protects consumers from risky loans   (AFRCFPBYieldSpreadPremiumLetter_2.25.13.pdf)


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