Fed proposes ban on payments for steering customers to higher-cost loans

In attempt to put on a more consumer-friendly face, the Federal Reserve proposes a ban on side payments to mortgage brokers that encourage them to steer customers to higher-cost mortgage loans.

Consumer groups have been fighting these payments, known as yield spread premiums, for years. It's these payments that likely helped to drive so many people to the subprime loans that caused much of the mortgage mess today.

Most people didn't even know that these payments were being made to brokers because disclosure in some cases was not required and in other cases not easily seen because they were hidden on closing documents.

The payments were never part of the closing costs that buyers or sellers paid. They were payments made on the side when a mortgage broker steered a person to a higher-cost loan.