Vision Credit Education, Inc.

The NC legislature unanimously passed HB 2188, which becomes effective October 1, 2008 following Governor Easley’s signature. This bill protects unsuspecting consumers from rogue behaviors of mortgage brokers.

What Are Yield Spread Premiums?

Yield spread premiums refer to kickbacks paid by lenders to mortgage brokers as an incentive to steer consumers into higher interest rate loans than what they otherwise qualify for. In other words, a broker could get thousands of dollars in extra commissions by convincing a buyer to sign for a 10% loan rate when they actually qualify for a 7% loan rate.

The buyer is stuck with a loan that costs them tens of thousands of dollars in extra interest. Addtitionally, the monthly payments could be hundreds of dollars more than the buyer should be paying.

Mortgage brokers must disclose yield spread premiums in the loan documentation. However, most brokers gloss over this material when explaining the paperwork to homebuyers.

HB 2188

HB 2188 outlaws the payment of yield spread premiums by lenders to mortgage brokers on subprime mortgages in North Carolina. This takes away the financial incentive for brokers to steer borrowers into higher interest loans than they qualify for.

The result is that homebuyers that do not educate themselves enough to demand a better rate can still have some protection from greedy mortgage brokers. Homeowners that close on their mortgages prior to October 1, 2008 do not receive protection under this bill.

For NC homeowners that are facing foreclosure, they have new protections established by HB 2463. This bill is designed to help homeowners that were placed into predatory loan products.