March 5, 1999
Washington Housing Secretary Andrew Cuomo announced a policy statement designed to save Americans millions of dollars a year by protecting them from excessive mortgage broker fees and by encouraging improved disclosure of mortgage broker fees and services.
The Department of Housing and Urban Development's policy statement deals with the Real Estate Settlement Procedures Act (RESPA), which regulates mortgage loan settlement services.
The policy statement issued today clarifies HUD'S long-standing position dealing with fees paid to mortgage brokers. The statement says that the compensation a broker receives from a lender and from a borrower must be reasonable for the actual work performed.
The fee disclosure called for in the policy statement is designed to make it easier for millions of homebuyers and families refinancing their mortgages to comparison shop for a home loan and save money on the fees they pay mortgage brokers to find and originate home loans.
"Mortgage brokers have a right to be reasonably compensated for the services they provide," Cuomo said. "They don't have a right to collect illegal kickbacks and referral fees from lenders, and we will continue enforcing the law against these abuses. American families shouldn't be overcharged for mortgage services and should have the clear, easily understood information they need to shop around for the best deal when they select a mortgage broker."
An estimated 6 million American households paid for the services of mortgage brokers last year, in an effort to find the best interest rate and other financial terms on their mortgages. The brokers were involved in about half the mortgage transactions in the nation in 1998 worth about $730 billion. The number of families using mortgage brokers has been growing sharply in recent years.
Mortgage brokers frequently receive fees ranging from $1,000 to $3,000 per loan.
RESPA prohibits kickbacks, referral fees, or unearned fees in real estate transactions. However, it allows reasonable payments to be made for services actually performed and for other legitimate costs.