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Below are five excerpts from and Op-Ed piece entitled "Mortgage brokers' sleight of hand" written by Elizabeth Warren, a professor at Harvard Law School - which recently appeared in the Boston Globe:

1. In the past five years, if you called a mortgage broker when you were about to buy or refinance a house you may have been told, "We can check with lots of lenders so you'll get the best price." Because you are a careful shopper, this sounds good - one-stop comparative shopping. The broker most likely didn't add, "I'll take a bribe to steer you to the loan that is more expensive for you and more profitable for the lender."

2. There are brokers who take what amounts to a bribe from a mortgage company to steer a client into a higher-priced mortgage than it could qualify for, all the while assuring the client that this is the best possible deal.

3. The practice is sufficiently widespread that the bribe has a technical name, a "yield spread premium." The yield spread premium is a payment the mortgage company makes to the broker to persuade the broker to sell the homeowner a higher-priced loan.

4. The ultimate blow is that often the buyer who has been defrauded will end up paying the bribe as additional "points" added to the closing costs.

5. A vice president of Fannie Mae has described the premiums as "lender kickbacks," but the practice remains legal. The additional costs for the bribe are slipped into the closing document as part of the closing costs. Under pressure from the mortgage-broker industry, Congress and the regulatory agencies have generally approved of yield spread premiums. In fact, mortgage brokers face few regulatory restrictions.

In fact, the following was reported at:

http://rismedia.com/2008-01-07/consumer-advocates-disclose-the-yield-spread-premium-kick-back-on-mortgages/

"...So how bad is the mortgage yield spread premium kick back issue? According to the National Mortgage Complaint Center, 'it's so bad that only 1 out of 100 consumers even know what it is. Even worse, on mortgage broker transactions, where the broker is required to disclose the yield spread premium kick back, only 2 percent of all consumers even know what it was, or how it affected their monthly mortgage payment'...On mortgage loans or refinances from a bank or mortgage banker there is no requirement to even disclose the kickback, even though like mortgage brokers, they get these kick backs too. Americas Watchdog's President estimates 'the average U.S. homeowner pays about $125 more per month, because a bank, mortgage banker or home builder failed to mention that they received thousands of dollars for inflating an unsuspecting consumer's interest rate over the best interest rates available. In the end an unsuspecting consumer simply ends up with a much higher monthly mortgage payment'...."

$125 per month is $1500 per year. $1500 per year for 30 years is $45,000.

What a scam.

- Ed Smith, Publisher
The EHS Letter Manual