More info about the National Association of Mortgage Brokers' successful lobbying for YSPs here.

Not as "common sense" as you might think, buddy boy.

1. originators of loans have to get paid somehow. They get paid one of 2 ways, the bank pays them to sell a higher rate, or the person getting the loan pays as part of the closing costs.

2. Brokers are required by law to disclose what the bank is paying them for selling the higher rate.

3. in many situations borrowers cannot get the loan if they have to pay up front costs as this eats into their equity.

lets say that you got one of those 2 year interest only arms. you bought your place for 300k with 30k down. 2 years have passed and you want to get a 30 year fixed loan, and your property is appraised at 330k now. you have 20% equity, which means that you shouldn't be paying mortgage insurance anymore. If a bank won't give you a loan, and you have to go to a broker, they will have to charge all the fees on the front of the loan. This means that they will have to pay 10k or so out of pocket, or roll those costs into the loan, eating up 1/6th of the equity that they have in the home, making the borrower pay mortgage insurance (about a 10% rise in payment) and insuring that they will probably have to refinance again in the near future.

Removing the options that borrowers have to get a loan is always bad. If they are so concerned about this, make BORROWERS attend a 2-4 hour class on how mortgages are set up, or make them pass a test on how loans work. that would have a much better effect.