Tag Archives: Federal Reserve Board

New LO Compensation Here To Stay?

8 Apr

Loan Originators have known for months that it was imminent:  compensation was no longer going to be paid in the same way.  For years they have been paid by the borrower in the form of an origination fee “up front” and by the bank in the form of yield spread premium “on the back”.  No longer, on products where back end premiums were fat.

The purpose of the Federal Reserve Board’s new rule was to “protect” consumers from fees which are tied to the rate offered.  To put it very simply, by removing back end premiums and by ruling that loan originators can no longer pay some of the closing costs for the borrower, the Fed has taken away the loan originator’s competitive edge.  The consumer can no longer benefit from discounts that drive competition between lenders.

The National Association of Mortgage Brokers (NAMB) has taken steps to fight the Fed on this new rule.  A stay on the April first implementation of the new rule lasted only five days, however.  The United States Court of Appeals ruled against the stay and appellate judges lifted the stay.  The new LO compensation rule is now in effect but the NAMB is committed to continuing the appeal.

“NAMB will continue to fight for its members, our industry, and ultimately, the consumer,” said NAMB President Mike D’Alonzo. “The voice of the mortgage industry needs to be heard and we vow to make sure that happens! We thank everyone for their continued support.”

See the NAMB press release here: http://www.namb.org/namb/NewsBot.asp?MODE=VIEW&ID=296&SnID=933537982

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RESPA Compliance Guidance as it Applies to the Federal Reserve Board’s Mortgage Loan Originator Compensation Rules

23 Mar
US-DeptOfHUD-Seal

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 The U.S. Department of Housing and Urban Development’s Office of Housing, Office of RESPA and ILS  issues the following additional guidance on how mortgage loan originators (MLO) comply with the Real Estate Settlement Procedures Act (RESPA), in light of the Federal Reserve Board’s (FRB) Loan Originator Compensation rule that is effective April 1, 2011.

 

   This guidance seeks to clarify RESPA requirements related to proper disclosure on the GFE and HUD-1 settlement statement.

 

This guidance does not address substantive issues related to restrictions on mortgage loan originator compensation that are within the jurisdiction of the FRB.  The link to the RESPA guidance PDF is here:

http://www.hud.gov/offices/hsg/rmra/res/mlocomplrodup31811v2.pdf

There is still some confusion as to LO compensation – more information to follow.