By Alan Zibel, AP Real Estate Writer
WASHINGTON (AP) — The Federal Reserve is banning mortgage brokers and lenders from reaping bigger fees by steering consumers into more expensive home loans.
The central bank said Monday the new rules, which go into effect next April, will bar lenders from steering borrowers into loans that are not in their interest solely because they can receive inflated fees.
Such fees have been a contentious issue in the mortgage industry. Consumer advocates have charged that mortgage brokers fed the housing crisis by steering people into risky home loans that wound up going bust.
The fees were also barred in the sweeping financial overhaul signed by President Barack Obama last month.
Roy DeLoach, chief executive of the National Association of Mortgage Brokers, said his group supported the Fed's action because it applies to everyone who makes loans, not just brokers.
"I think it's a great victory for consumers and has a lot of things brokers have been saying for years," DeLoach said.
The Fed also said consumers must be notified within 30 days of having their mortgage sold or transferred to another lender.
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