How does the law strengthen the 1999 N.C Predatory Lending Law?
Under the 1999 law, not all of a mortgage broker’s compensation was included in the calculation to determine whether a loan is “high cost” and thus qualifies for extra protections. (Loans with fees that add up to 5% or more are designated as “high cost” under the law.) The 1999 law included front-end compensation in determining a loan’s status under the law, but it did not include back-end compensation—most notably, “yield-spread premiums.” A yield spread premium (YSP) is a kickback paid to a broker for placing a borrower in a higher interest rate than the best loan for which they qualify from that lender. Essentially the lender is splitting the extra profit on the higher interest rate loan with the mortgage broker. HB 1817 strengthens the 1999 law by including YSPs in the costs used to determine whether a loan is “high cost,” and thus triggers additional protections.
