The Facts

• Concerned about mortgage broker fees that were described as "predatory" and "abusive," the OCC created guidelines aimed at establishing reasonable fees and protecting borrowers and banks. Since the early 2000s, policies require increased clarity about the fine print so that all of the various details of the loan and the fees are clearly stated. The OCC hopes to ensure that all parties understand the requirements of the agreement and to avoid any confusion about cost and responsibility.
  
  

History

• In 2003, the Office of the Comptroller of the Currency began monitoring real estate transactions in general--and mortgage broker fees in particular--more closely. The change in policy came as a result of concerns that mortgage brokers were "fee packing" by applying exorbitant fees to loans and thus creating an unnecessary burden on the loan applicant. Additionally, the OCC recognized that pre-2003 policies made it possible for mortgage brokers to layer fees behind contract complexity and thus create burdens of responsibility on the lending banks as well.
  
  

Significance

• Mortgage brokers play an important role in the process of buying and selling real estate. The brokers are responsible for generating as many as 50 percent of the initial transactions, and brokers are heavily involved in the process of transferring mortgages from one lender to another. As a result, it is easy for extra fees to find their way into the loans. The OCC guidelines require mortgage broker fees to be more transparent and more clearly stated in the agreements.
  
  

Benefits

• In addition to protecting loan applicants, the OCC guidelines also protect banks. The mortgage broker fee agreements must provide termination clauses to allow the banks to cancel or remove themselves from the agreement if necessary, and the agreements must allow the banks and the OCC to look more closely into both the borrower and the mortgage broker's records before signing any loan documents.
  
  

Considerations

• While the OCC is not authorized to create legislation to mandate change, the agency does take responsibility for supervising bank activities, and as such created a program of oversight that ensures fair fees through management of mortgage broker agreements. At the same time, many states have objected to the OCC interference, claiming that the state's own governing bodies are responsible for creating the guidelines for real estate transactions. In 2007, the Supreme Court ruled in favor of the OCC, but as the OCC is a regulatory body instead of a legislative body, its authority to manage banks and brokers remains limited.