RALEIGH, NC - North Carolina Governor Mike Easley signed House Bill 2188 - which eliminates rate or yield spread premiums - into law. North Carolina is the first state to ban yield spread premiums.
While the bill was conceived with good intentions, the legislation may actually hurt the industry by discriminating against small businesses and limiting choices for consumers.
Supporters believe that yield-spread premiums encourage brokers to charge higher fees, with no additional benefit to the homeowner because they are essentially kickbacks that brokers routinely receive on subprime loans for steering a borrower into a higher interest rate than the lender has set for the loan.
Critics say yield spread premiums allow mortgage brokers to offer loans with reduced or no closing cost loans and help consumers by spreading out fees over the life of a loan.
The bill was sponsored by Reps. Dan Blue and Walter Church. The law becomes effective October 1, 2008.
