The new Federal Reserve rule on compensation means new rules for some mortgage originators, explained Ken Jones, vice president of the California Association of Mortgage Professionals.
Speaking at a meeting of the group in Long Beach, Calif., he said the rule means that on every deal a mortgage broker does, he or she has to make a decision on whether they are compensated by the wholesale investor or the borrower.
"To some in this room, this is not a big deal," as they are already doing business in compliance with the rule.
If the lender is compensating an originator, they need to have a "pre-agreement" in place that sets the terms of that compensation. But the originator can have agreements in place for different levels of compensation from different wholesalers.
There is an anti-steering provision in the rule, but the rule adds if the originator does not select the loan with the lowest compensation amount, the originator must show that the loan is in the borrower's best interest.
Peter Ogilvie, a past president of the organization, asked rhetorically during the Q&A: Why are some insisting that the yield-spread premium be part of compensation? The new good-faith estimate form shows the YSP as a credit to the borrower, he noted in support of his point.
Another originator during the Q&A session expressed worry that the anti-steering provision would make originators a target for attorneys.
Jones said the debate regarding the rule would go on as things are being worked out regarding implementation of the financial reform bill.
