02 April 2008

Limits to Compensation for Mortgage Brokers at Countrywide

Ailing (and corrupt) mortgage giant Countrywide Financial has just placed a cap of 4% on Mortgage brokers.

Note that 4% is way too high, but it's a start.

Basically, it stops incentivizing the most extreme Yield Spread Premiums (basically a "load" on the loan which largely goes to the broker) to the detriment of the borrower, the lender, and the rest of the economy.

The incentives in the current home mortgage environment is a morass of forces pushing lenders toward unsafe, immoral, and destructive loan products, and this is something that should be changed.

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