Industry Letters

Disclosure of Broker Compensation and Other Fees

December 15, 2009

To: The Individual or Institution Addressed

RE: Disclosure of Broker Compensation and Other Fees

On August 5, 2008 Governor David A. Paterson signed into law a lending reform bill to address the ongoing mortgage crisis in New York State.  Among other things, the Banking Law was amended to add a new section 6-m to provide protections for a new class or mortgages called “subprime home loans” to distinguish them from the state’s existing anti-predatory lending law, Banking Law section 6-l, which governs “high-cost” mortgages.  In addition, Banking Law section 6-l was amended to add some additional protections for high cost loans.  Sections 6-m(n) and 6-l(s) were amended to prohibit abusive yield spread premiums.  In particular, these provisions require the mortgage broker, at the time of application, to disclose the exact amount of the total compensation the broker will receive from any source, including the borrower and the lender.  Although these provisions do not restrict the ability of a borrower to utilize a yield spread premium in order to offset any up front costs by accepting a higher interest, they require that for borrowers who choose this option, any compensation from the lender which exceeds the exact amount of total compensation owed to the broker must be credited to the borrower.  The law required the superintendent to prescribe the form that such disclosures shall take.

A copy of the proposed disclosure form is enclosed. I invite you to submit written comments regarding the proposed disclosure form to my attention by January 13, 2009. http://www.banking.state.ny.us/ilmb091215.pdf

Should you wish to discuss this matter further, please contact me directly.

Very truly yours,

Jane M. Azia
Director of Non-Depository Institutions and Consumer Protection
[email protected]
(212) 709-3503