Culpepper v. Inland Mortgage Corp. YSP is still legal

The manner in which mortgage brokers are paid by lenders is called Yield Spread Premium. A ruling by the 11th Circuit Court of Appeals has reaffirmed its position in a 12-year-old legal battle that lender-paid fees to mortgage brokers are proper unless consumers can prove the amount is excessive.

Here's the court documents from the 1989 case.

Fiduciary Duty for Mortgage Brokers

If Mortgage Brokers want to rise above the fray and become professionals along side Doctors, Lawyers, Accountants and other professions, then the bar to entry must be raised. Additionally Mortgage Brokers must embrace fiduciary responsibilities to their clients.

I like the following paragraph from an article from the Ethical Lending Foundation to more clearly define fiduciary responsibility:

The industry of mortgage lending is at a historical crossroads. It can either become a professional group with fiduciary standards or it can remain a retail establishment in which most of the burden of information is with consumers. Yet, they can no longer have it both ways. Yet, let us be clear that mortgage loan originators working at all types of lending institutions can owe fiduciary duties without representing to consumers that they are finding them the “best loan” or getting them the “best result.” A fiduciary standard simply would not put this burden on loan originators. By way of analogy let’s clarify. Medical doctors, lawyers, and Realtors do not have to promise that they will get their clients/patients the best surgical results, the best legal results, or the best deal on the house in order to discharge their clear fiduciary duties. Instead, they are promising to do the best job they can; to fully inform their clients of all relevant information and risks; and to carefully make sure that their clients have been provided with the necessary tools and understanding to make a fully-informed decision. Mortgage brokers, bankers, lenders, and consumer finance companies could easily adopt a fiduciary standard for their loan originators if they chose to, and it would be both practicable and fair.

It only makes sense to lead the way, and let the Mortgage Bankers and Lenders languish in the netherworld of non-disclosure similar to their hiding their fees and compensation.

Cuomo Subpoenaing New York Mortgage Companies

Apparently the New York Attorney General is interested in learning more about the industry and how mortgage brokers get paid. When he was with HUD he wanted more strict disclosures about lender payments to mortgage brokers, called Yield Spread Premiums (YSP). I'm unable to find which companies have received subpoenas, but I'm very interested to know. I'd to see if there's a general target like subprime loans, or emerging market loans.