What Might Proposed New LO Comp Do To Reverse Mortgage Compensation?

31 Aug

Earlier this month, the Consumer Financial Protection Bureau proposed new guidelines for Loan Officer compensation.  Their purpose, as stated, is to simplify fees and discount points as presented to borrowers.  The problem is, the Federal Housing Administration’s Home Equity Conversion Mortgage program does not allow for discount points, and eliminating origination fees could cause an increase in the loan’s interest rate, resulting in fewer funds available for the borrower.

With respect to reverse mortgages, the CFPB clarified interpretation of “amount of credit extended” as it related to compensation. The CFPB specifies the “initial principal limit” rather than the “max claim amount” is the interpretation to be used.

Because government-insured reverse mortgages fall under many of their own rules under the Department of Housing and Urban Development and Federal Housing Administration, the industry has asked for reverse mortgage exceptions with many of the rules that are currently being made.

The current rule making is open for comments through October 16, with a final rule expected in January 2013.

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