The Consumer Financial Protection Bureau released a series of rules overhauling the mortgage system. One rule released on Friday bans compensation to mortgage originators based on loan terms, including a higher interest rate or generally a high-cost loan.

The agency, created under the 2010 Dodd-Frank Act, said the rule is meant to prevent originators from wrongfully placing borrowers into risky loans in order to get higher payouts.

CFPB Directory Richard Cordray said in a conference call on Friday, "One of the reasons for the collapse was that mortgage borrowers were steered towards high-cost and risky loans they had no real chance of paying back. The higher the interest rate on the loan or the more the consumer paid in upfront charges, the more the loan originator profited."

American Banker's Rachel Witkowski writes that the CFPB will prohibit loan originators, including mortgage brokers and loan officers, from two main things: "compensation that varies with the loan terms" and "allowing 'dual compensation.'"

For the full piece see "CFPB Cracks Down on Mortgage Lenders' Compensation" (may require subscription).