In a new letter industry trade groups are urging the Federal Reserve to reject a recent staff interpretation regarding its loan officer compensation rule that would restrict payments between mortgage companies and "affiliated" real estate brokerages and title agencies.
The compensation rule becomes operative April 1. Trade group officials recently learned that the Fed staff believes fees paid to affiliated title or real estate brokerage servicers could run afoul of the rule.
"This would, in effect, prohibit — for no justifiable reason — a successful and long-established business model…that offers consumers one-stop shopping for services through a network of affiliated companies," the letter says.
The signers to the letter are urging Fed governors "not to adopt" the staff interpretation and consider two possible solutions. (A copy of the letter was provided to National Mortgage News but it's unclear whether it has been sent.)
One solution would be to exempt "bona fide and reasonable" fees paid for third-party title, appraisal and real estate brokerage services from the scope of the loan compensation rule. "A second solution might be to limit the definition of 'affiliate' to include mortgage lending and mortgage brokering businesses as specifically stated in the rule but not to include ancillary providers in that definition," the letter says.
Some of the signers to the letter include the Real Estate Providers Council, the National Association of Realtors, and Consumer Mortgage Coalition.
