There's plenty of blame to go around in today's sour housing market.

Home buyers who didn't read the small print.

Speculators who didn't read the writing on the wall.

The Federal Reserve for not reading market conditions fast enough.

Now, mortgage brokers are the latest target in a study that says they often didn't give borrowers an opportunity to read the small print.

That missed opportunity cost some borrowers thousands of dollars more than they needed to pay for a home loan.

The extra cost could make the difference between maintaining homeownership or losing it to foreclosure.

"Steered Wrong: Brokers, Borrowers and Subprime Loans" is the first study to quantify the effect of broker compensation on borrowers, according to the Center for Responsible Lending. The center conducted the study with an analysis of 1.7 million mortgages made between 2004 and 2006.

The study found that borrowers with weak credit often obtained brokered mortgages that carried higher interest rates than the same loan obtained directly from the lender.

In the first four years of a loan, that could cost more than $5,000. Over a 30-year period the extra cost amounts to $36,000, according to the study.

That's not just because borrowers had weak credit. Compensation from lenders to brokers, called "yield spread premiums" or "YSPs" give brokers an incentive to steer borrowers to higher priced mortgages, the study says. The study also blamed a lack of transparency and the complexity of the loans in the subprime market for making it tough for borrowers to know if there's a cheaper mortgage available.

However, the study also found, for others, brokers can often make a better deal than going directly to the lender.

Those with better credit fare better and get comparable loan prices whether they go through a broker or directly to a retail lender.

Borrowers with very high credit tend to get a better deal through a broker than from a direct lender.

The study recommends that policymakers should ban practices that give brokers an incentive to overcharge subprime borrowers; ensure that lenders take responsibility for brokered loans made in their name and policymakers should set standards requiring brokers to serve customers' interests.

Documented discrimination gets some of the blame.

In a related study with another "first" element, the National Fair Housing Alliance documents racial and ethnic discrimination and the lack of fair housing enforcement as a contributor to the foreclosure fallout. That's the first time a documented study links discrimination of the housing hangover.

Marking the 40th anniversary of the passage of the federal Fair Housing Act, the alliance says some 3.7 million people face discrimination when they seek housing, but the U.S. Department of Housing and Urban Development (HUD) only issue 31 related charges of discrimination in 2007 while the Department of Justice filed just 35 cases.

"Lack of federal oversight of the work of mortgage lenders and brokers has led us to today's foreclosure crisis," said Shanna L. Smith, President and CEO of the alliance.

The alliance sites "countless studies" that demonstrate unscrupulous lenders targeted minority buyers yet the total number of fair housing complaints filed represents less than on percent of the annual incidence of discrimination.

"Private fair housing groups with minimal resources have processed 10 times more fair lending complaints than the federal government," continued Smith. "How is this possible? This is inexcusable."

Published: April 15, 2008

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A journalist for 35-years, Broderick Perkins parlayed an old-school daily newspaper career into a digital news service offering editorial content and consulting services. Perkins' San Jose, CA-based DeadlineNews Group includes the flagship news site, DeadlineNews.Com, offering real estate, personal finance and consumer journalism, and a backshop, the Deadline Newsroom.