Pay in Mortgage Industry Gets Scrutiny

Christian Science Monitor (04/17/08) P. 3; Trumbull, Mark
How the economy fares could ultimately determine how much the pay incentives of mortgage industry professionals are reformed. Mortgage executives recently came under fire before Congress for the bonuses offered by their firms, which saw subprime lending as an opportunity to earn big fees. Now, new regulatory guidelines for mortgage lenders are a virtual certainty. In December, the Federal Reserve proposed new rules that would require mortgage brokers to disclose more clearly how they are paid and reduce reliance on bonuses called "yield spread premiums," and the central bank continues to gather comments. "If it gets really bad, the nature of the inquiry could be unbounded," says Raghuram Rajan, a finance expert at the University of Chicago.