New rules for mortgage loan originators
A man holds a pen over mortgage application forms.
STORY UPDATE Late Thursday, the U.S. Court of Appeals granted a stay on the Fed's loan officer compensation rule. The rule will be delayed until a hearing on April 5. You can read more here.
Steve Chiotakis: New rules go into effect today that are supposed to help consumers get the best deal from a mortgage broker. The Federal Reserve will now require brokers to steer consumers to the lowest-priced loan available.
Marketplace's Nancy Marshall Genzer reports.
Nancy Marshall Genzer: Mortgage brokers are supposed to sort through loans from a number of different banks, then help borrowers choose. Brokers get a commission for this. During the housing bubble, some brokers steered consumers to loans that earned them the highest commissions. But those were the most expensive loans for borrowers. Now brokers will have to recommend the best deal for consumers.
Nick Retsinas teaches real estate at Harvard. He says the new rules should protect borrowers.
Nick Retsinas: They can rely a little more on the broker, that the broker is acting in their interest, not in the lender's interest overall.
But how do you enforce that? It won't be easy, says Columbia real estate professor Chris Mayer.
Chris Mayer: The idea of legislating good behavior is just very, very hard.
Federal regulators can't oversee every mortgage broker. But if they're suspicious, they can ask brokers to justify a loan offer.
In Washington, I'm Nancy Marshall Genzer for Marketplace.