Franklin American Mortgage Co., the nation’s 12th largest wholesaler, this week told its loan brokers that beginning Aug. 1 the firm will only compensate them using the “lender paid” model.
A memo from Andrew Taylor, Franklin American’s wholesale director, noted that the nonbank funder is “strongly committed to wholesale lending and maintaining a compliant lending environment.”
But the firm, based in Franklin, Tenn., said it is making the change due to “recent industry events.” Taylor and another executive at the company could not be reached for comment.
Wholesalers currently offer brokers at least two compensation models: lender paid and “borrower paid.”
It’s unclear how many wholesalers will ban borrower paid but more are considering it, brokers told National Mortgage News. The memo was provided to NMN by a confidential source.
Some wholesalers feel that the Consumer Financial Protection Bureau will radically alter broker compensation through a new LO compensation rule and are trying to be proactive.
There is a growing fear in the brokerage sector that if the CFPB mandates that LOs and brokers be paid a fixed or flat fee that lower-balance loans will go unfunded because such transactions will be unprofitable—at least through using table funding.
“If you can’t make money on a $40,000 loan in Kansas you won’t do the loan,” said one broker, requesting his name not be published.
Next week the CFPB may unveil its new LO compensation proposal.
