The Federal Reserve Board has not changed its interpretation regarding the loan officer compensation rule in a consumer-paid transaction, as initially thought.
At a congressional hearing Wednesday, Rep. Brad Sherman, D-Calif., indicated that mortgage brokers could compensate their employees through commissions in consumer-paid transactions. "I understand this represents a change in their policy," Rep. Sherman said at a House Financial Services subcommittee hearing Wednesday afternoon. The congressman cited written testimony by Fed consumer affairs director Sandra Braunstein for his conclusion.
But it now appears to be a misunderstanding. "The Federal Reserve Board has not revised its regulations or the staff commentary that interrupts the rule," a Fed spokesman said.
At the hearing, Rep. Sherman asked National Association of Mortgage Brokers vice president Mike Anderson to comment on the Fed's new interpretation. But Anderson said he was not aware of the change and needed to review the Fed’s interpretation before commenting.
Contacted on Thursday by National Mortgage News, Anderson said there must be a misunderstanding because Braunstein's testimony states that a mortgage brokerage firm cannot pay a commission to a loan officer if the brokerage is paid directly by the consumer.
Her testimony goes on to say a mortgage broker can pay an “incentive fee” to an employee in transactions where the consumer pays origination fees directly to the brokerage firm. But an incentive fee is not the same as a commission. "There is no change," Anderson said.
(Editorial note: an earlier version of this story, based on the Congressman’s comments, suggested that the Fed had loosened its rules on mortgage brokerage firms compensating their loan officers in consumer paid transactions.)
