A new Fed staff study finds wide disparities among the mortgage rates borrowers pay on exactly the same loan that has nothing to do with risk and apparently everything to do with borrower sophistication. If these data rise to political consciousness, then Democrats next year may renew the pressure that led to yield-spread premium (YSP) restrictions in Dodd-Frank, this time hard-wiring them via new GSE and FHA restrictions. Pricing flexibility within the boundaries of fair-lending constraints would then remain only for portfolio lending, another boost to banks if the new seasoned-QM rules kick in and macroeconomic and rate conditions turn propitious.
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