On Monday the Federal Reserve took steps to end a lending practice which raised controversy and had pushed the housing boom to untenable heights and then speeded up its collapse.

The Fed announced that it was set to adopt new rules under which yield spread premiums would be banned. It allowed lenders and mortgage brokers to make additional profit from loans by charging borrowers interest rates which are higher than the market rates.

A subdued reaction could be seen regarding the change. This summer .the package passed by Congress already dealt with the issue. According to some others this ban should have been imposed long time back .It should have been done in a time when it could have directly affected the quality of the loan.

The action had been termed a real milestone by the president of the Center for Responsible Lending, Mr. Michael D. Calhoun, but he said that for the last fifteen years he had tried to drill it into the heads of regulators that yield spread premiums were similar to illegal kickbacks.

Even when borrowers were spending more money they did not have clear idea about a yield spread premium.

Under traditional rules Home buyers pay directly to mortgage brokers. Borrowers got compensated by lenders as well with the rise of the premium. Lenders effectively started paying bonuses to brokers who fetched them loans on high interest rates that were coveted by mortgage investors.

According to critics some brokers made their clients understand that it was the best deal that they could avail. Mostly sub prime lenders opted for yield spread premiums.

According to Mr. Calhoun Mortgage brokers and other people on the frontlines were making two to three times more money by pushing the buyer to take the loans than what they could get out of a thirty year fixed rate loans.