Ohio Attorney General Richard Cordray is backing a federal proposal to eliminate incentives paid to loan officers and mortgage brokers that result in loans that are overly risky or expensive. Ideastream's Bill Rice reports.
Cordray is one of 15 state attorneys general who signed onto comments submitted to the Federal Reserve about proposed changes to the federal Truth in Lending Act.
The AG's say they support a proposed ban on brokers' compensation based on the type of loan originated, singling out so-called yield spread premiums, or YSPs - that's the difference between the interest rate a broker secures from a borrower and the minimum the lender will accept. Much or all of that difference often goes to compensate the broker.
The AG's say such incentives nearly always work to the consumers' disadvantage, and fuel the kind of predatory lending that has ruined communities across Ohio and the nation.
In addition to the ban, they support basing a proposal to instead base compensation packages on the long term performance of loans. They're less impressed proposed new rules calling for more disclosures of sales practices, saying much deceptive lending occurred despite an abundance of such disclosure requirements already on the books.
Bill Rice, 90.3