The FRB has finalized tough new rules on mortgage-originator compensation and related practices even as new law mandates still tougher requirements going forward. The FRB’s regulations prohibit yield-spread premiums (YSPs) and similar forms of originator compensation. “Steering” is also banned, although a safe harbor is provided if consumers are presented acceptable product options. The rules cover all loan originators as defined, not just independent mortgage brokers. As a result, all mortgage originators, including banking organizations, may need to change compensation and mortgage-marketing practices, doing so on a rapid turn-around even as broader rules advance. The sum total of all of these rules may well be a strategic redefinition of U.S. mortgage finance that, while it promotes consumer protection, also leads to greater concentration of origination in the largest banking organizations.

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