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Amending financial reform legislation as it makes its way through Congress, the Senate also voted to outlaw stated-income mortgages — loans made without using tax documents, pay stubs or bank records to verify that borrowers actually earn as much as they say they do.
These so-called liar loans and the bonus payments are widely regarded as key factors leading to the subprime lending debacle that snowballed into the deep recession. Critics described the bonuses as thinly disguised kickbacks for steering borrowers into burdensome mortgages.
“Deceptive mortgage practices like hidden steering payments directly led to the Wall Street meltdown and resulted in millions of families losing their homes,” said Sen. Jeff Merkley (D-Ore.), who sponsored the ban on broker bonuses for higher-interest loans.
The vote to ban the practices was 63 to 36.
Read more from the LA Times
