CMC: Fed Needs to Refine Compensation Rule

The Federal Reserve Board should permit compensation of loan officers and mortgage brokers based on a percentage of the loan amount with a minimum and maximum limit, according to the Consumer Mortgage Coalition. "It should also be permissible to use percentages that decrease as the loan amount increases," CMC says in a comment letter on a proposed Truth in Lending Act rule. Under the Fed's TILA proposal, LO and broker compensation based on increases in the interest rate or changes to other loan terms would be prohibited. The Fed invited comment on allowing compensation based on the loan amount. The industry trade group recommends that lenders should be permitted to reduce compensation for loans with high loan-to-value ratios. This approach would address the Fed's concerns about originators financing closing costs and packing other fees into the loan amount. CMC also wants the Fed to allow compensation based on the overall loan volume -- in terms of number of loans and loan amount. "We request clarification that compensation may be based upon pull-through rates, file quality, customer satisfaction and communication quality. Lenders need these common sense management tools," CMC says.