Balancing Risks, Benefits

In “Upside and Downside of YSPs” (June 16), Jack Guttentag examines yield spread premiums and the risks posed in adopting proposals that limit their responsible use.

Guttentag is right on the mark in cautioning regulators of the risk of “throwing out the baby with the bathwater” when YSPs can be used to benefit the consumer. The purpose of YSPs is not to deliver “high cost” loans by mortgage brokers. Used as a means to decrease closing costs, YSPs can be beneficial to borrowers with little cash to obtain no-cost mortgages or represent an alternative for those willing to pay a higher rate to reduce upfront fees. In many case, YSPs make the difference between closing a sale and being denied a loan.

As the author states, disclosure is the remedy to unfair practices. In fact, members of the California Assn. of Mortgage Brokers are already remedying the problem by committing to upfront practices by disclosing their compensation, in writing, before submitting an application to a lender. Member brokers are committed to conducting their business activities in a professional manner--a sure-fire recipe for putting an end to deceptive practices.

TED GROSE

Los Angeles

Grose is president of the California Assn. of Mortgage Brokers.