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Congressman Barney Frank wants to eliminate zero point mortgages

Franks calls for ban

House Financial Services Committee Chairman Congressman Barney Frank of Massachusetts indicated Wednesday, during the conference committee meeting on Financial Reform, yield spread premiums (YSP), would be banned. Such a prohibition would eliminate zero point and no cost mortgages for Americans that deal with mortgage brokers or bankers.

Most home buyers in this country elect zero point mortgages to save on up front or out of pocket costs when purchasing or refinancing real estate. This ban will cause millions of potential homebuyers and current homeowners to be unable to finance homes, because of the increased costs. The greatest impact will be felt by low and moderate income borrowers, especially in minority communities.

Mr. Frank’s misdirected beliefs come from the days when some mortgage originators overcharged borrowers for loans that were developed and made available by large federally regulated institutions, such as CountrywideAmeriquestWashington Mutual Federal Savings Bank, Fannie Mae and Freddie Mac.

Current standards

Mortgage brokers and their originators, are now the most heavily regulated part of the mortgage financing industry. Although, previously state regulated, they now follow a strict uniform national standard known as the SAFE Act. Some standards include, 20 hours of pre-education, 8 hours of continuing education, background investigations, fingerprinting, registration in a national database and the passing of both national and state tests.

Bank employees, who perform the exact same function, are exempt and will only be required to register with the national database. The banks themselves will be unaffected by a YSP ban, leaving them with little competition and a clear path to continue what could be the largest increase in mortgage costs ever in the history of this country.

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Chairman Frank will continue to allow banks to pay and/or receive service release premiums (SRP), which are the exact equivalent of yield spread premiums (YSP). It’s also important to note, brokers have disclosed their YSP compensation to consumers since 1992, as mandated by HUD. However, banks and lenders have no such disclosure requirement, which makes brokers the victims of their own disclosure.

A call to action

We urge everyone in any part of the real estate and/or mortgage industry, along with consumers, consumer protection groups, trade organizations and unions to contact their Senators or Representatives and demand that Chairman Frank remove any reference to yield spread premiums (YSP), or any cap on originator compensation, from the final reform bill. Competition and industry already provide for such safeguards. Congress needs to allow America to grow its economy and real estate industry without further over regulation.

Written By

Realty Reality! That describes Fred, a sharp witted and outspoken realist for the mortgage and real estate world who has appeared on CNBC and NPR's Marketplace along with being quoted in the New York Times, The Wall Street Journal and other media outlets. Fred is the CEO of U S Spaces, Inc/Arrivva (a real estate brokerage firm in PA, NJ, DE and CA) and U S Loans Mortgage Inc (mortgage brokerage in PA, CA, FL and VA), and serves on the Board of Directors and is the Federal Legislative Director for the UpFront Mortgage Brokers. Fred is also the co-creator of real estate startup, a mathematically driven rental search engine. See everything Fred at



  1. Joe Loomer

    June 18, 2010 at 8:15 pm

    Fred, Fred, Fred – always on point. I love it.

    Navy Chief, Navy Pride

  2. celebrity homes

    June 18, 2010 at 9:58 pm

    I just don’t see YSP’s being banned when the final bill comes out. Giving the nod to the banks isn’t generally what Barney Frank does in my opinion.

  3. Memphis Home Loans Now

    June 29, 2010 at 1:26 pm

    Thanks for Congressman Barney Frank! and Thanks for this useful post..

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