The Federal Reserve Board has decided to make it easier for title companies and other affiliates of mortgage firms to operate under the agency's loan officer compensation rule which goes into effect April 1.
Under a new interpretation, the Fed will not lump fees paid for affiliated services in with originator compensation.
Initially, the Fed was moving toward an interpretation that would treat the affiliate and mortgage company as a single person. Any fees paid to the affiliates would be considered compensation paid to the originator.
Industry groups objected to this approach, claiming it would prohibit a well-established business model of offering consumers one-stop shopping through a network of affiliated companies.
During a webinar on Thursday afternoon, Fed senior attorney Paul Mondor said the Fed will 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.
Mondor, the Fed's point man on the issue, stressed, however, that the fees must be for a "genuine legitimate ancillary service" related to the transaction. "Not something that is made up."
