National Association of Mortgage Brokers

Broker Compensation Rule Delay Not Good for Business, by Michael Dolan, Broker Pro Mortgage

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Some mortgage brokers were happy Friday that a law suit against a Federal Reserve rule, scheduled to take effect that day, had been stayed 5 days. I wasn’t. The rule controlled how to price mortgages. Here’s what I posted on a major mortgage broker discussion site (It got noticed):

This stay is terrible news for our industry because it further delays necessary clean up. I agree the new compensation rule itself is counterproductive and redundant.

But that’s not our biggest problem. The first problem is that exploitive and greedy hiring practices caused the need for government intervention. Too many broker companies treat employed LOs [Loan Originators] like crap: no training, no decent pay schedule. This exploitation in turn pressured LOs into decisions that were not in the interest of homeowners.

Second, our industry representation is ineffective and even embarrassing. Suing is the tactic of those who do not understand how the system works and cannot produce effective compromise. Industry leaders have responded like children who have lost a candy bar. They go to Washington, DC and are not professional enough to wear a suit and tie. They don’t even realize they are announcing to the world they are untutored rubes. Then we hear nutty over-statements like “we have the best lawyers in the country.” It wasn’t until about the last month they realized that complaining about their jobs is bad politics. So – too late – they began to contend the new compensation rule was bad for homeowners but never really made a compelling argument.

Today’s result: confusion. You know what, the rule is bad. But it’s not that tough to figure out. “Oh my God! How can an industry survive if you have to pay branch managers a salary?” Complaining about how the rule hurts your business makes you seem greedy and self centered. Look around. Who agrees with industry groups? Who is with us? Nobody!

After five losing seasons, you fire the coach. The current professional organizations and the people running them need to step aside and make way for educated professionals who can work with regulators, build coalitions, and explain what we are doing for homeowners.

Michael Dolan
BrokerPro Mortgage, LLC
1001 SW 5th Ave #1100
Portland, OR 97204

503-895-5428 (NEW)

425-998-0191
800-843-9010
mobile: 503-287-4876

http://www.BrokerProMortgage.com

License # 114972

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LO Compensation Guidance Gets 11th Hour Treatment by Federal Reserve, by Nationalmortgageprofessional.com

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The Board of Governors of the Federal Reserve System has announced the release of its “Compliance Guide to Small Entities” regarding Regulation Z: Loan Originator Compensation and Steering. The Compliance Guide summarizes and explains rules adopted by the Board, but is not a substitute for the final rule itself, which will be enforced come April 1, 2011. Regulation Z; Docket No. R-1366, Truth-in-Lending was originally published in the Federal Register on Sept. 24, 2010, and as mandated by the Small Business Regulatory Enforcement Fairness Act (SBREFA) Section 212(a) (3), an agency is required to publish a compliance guide on the same date as the date of publication of the final rule (in this case, Sept. 24, 2010), or as soon as possible after that date and no later than the date on which the requirements of the rule become effective (April 1, 2011). 

The rule prohibits a loan originator from steering a consumer to enter into a loan that provides the loan originator with greater compensation, as compared to other transactions the loan originator offered or could have offered to the consumer, unless the loan is in the consumer’s interest.

The “Compliance Guide” states that “the regulation applies to all persons who originate loans, including mortgage brokers and their employees, as well as (as defined by the Federal Reserve) mortgage loan officers employed by depository institutions and other lenders. The rule does not apply to payments received by a creditor when selling the loan to a secondary market investor. When a mortgage brokerage firm originates a loan, it is not exempt under the final rule unless it is also a creditor that funds the loan from its own resources, such as its own line of credit.”

According to the Compliance Guide: “To be within the safe harbor, the loan originator must obtain loan options from a significant number of the creditors with which the originator regularly does business. The loan originator can present fewer than three loans and satisfy the safe harbor, if the loan(s) presented to the consumer otherwise meet the criteria in the rule.”

“The National Association of Mortgage Brokers (NAMB) believes that this does not satisfy the requirement as written,” said NAMB Government Affairs Committee Chair Michael Anderson, CRMS. “NAMB is reviewing the Compliance Guide and will taking appropriate action.” 

Click here to view “Compliance Guide to Small Entities” regarding Regulation Z: Loan Originator Compensation and Steering.

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