Loan brokers and loan officers who work for nonbanks are closely watching the issue because it could directly affect how much money the can earn on a transaction.
For the National Association of Independent Housing Professionals, a key issue to watch is dual compensation where the LO is paid by both the consumer and the wholesaler. “If dual compensation is an unfair and deceptive practice, why are creditors permitted to receive the same?” asked Marc Savitt, president of the trade group. “Dual compensation is not double compensation.”
The Consumer Financial Protection Bureau has proposed a rule that strictly prohibits brokers and their originators from being compensated by both the borrower and creditor.
NAIHP, whose membership includes mostly brokers and appraisers, believes it’s unfair to allow for the paying of servicing-released premiums to mortgage banking firms (creditors) while banning dual compensation.
Although studies are hard to come by, it’s generally assumed that over the past year or so LOs who for nonbanks are being offered better compensation plans than their counter-parts at depositories.
The Mortgage Bankers Association, in its comment letter on the rule, says it opposes the so-called zero-zero exemption.
The zero-zero exemption would require that mortgage bankers (creditors) and loan brokers make available to borrowers a mortgage “with no upfront discount points, origination points, or fees that are retained by the creditor, broker, or an affiliate of either if commission-based compensation is paid to an originator.”
The trade group says that overall it supports an exemption from the provision of Dodd-Frank that can be read to restrict the payment of a transaction specific commission to a loan originator by a creditor or a brokerage if the creditor or brokerage also receives points and fees from the borrower, but MBA opposes the zero-zero exemption as currently proposed.
CFPB declined to comment on the release date of the rule.