U.S. District Court Judge Beryl Howell who is presiding over a lawsuit aimed at preventing federal broker compensation rules from taking effect April 1 said Tuesday she will rule "shortly" on the matter but offered no clear timetable.
However, plaintiffs in the case against the Federal Reserve expect a ruling could come as early as Wednesday.
The judge's proclamation of "shortly" ended a Tuesday morning hearing in which oral arguments were heard from plaintiffs, the National Association of Mortgage Brokers and National Association of Independent Housing Professionals. The Fed's attorneys also presented their arguments in the case, which was filed in the District of Columbia.
Late Friday NAMB filed for a temporary restraining order and then changed its filing to a preliminary injunction on Tuesday. (The groups charge that the LO comp rule is misguided, will destroy the brokerage industry, and may be illegal.)
The Fed argues that it has the legal right to promulgate compensation rules under the Dodd-Frank Act. (Among other things, the rule bans broker compensation based on the rate and terms of the loan, disallows payments from both consumers and wholesale funders on the same deal, and prevents brokers from offering discounts to consumers by earning less money on a transaction.)
Marc Savitt, president of the NAIHP, said if the judge rules in the favor of brokers, the issue will not end here. The matter of how brokers are paid can then be decided by the Consumer Financial Protection Agency.
Savitt said of the judge, "She really did her homework in the case. I don't know how this will be decided," a sentiment echoed by Glen Corso, managing director of the Community Mortgage Banking Project, which filed an amicus brief on the side of NAIHP and NAMB. "The hearing went as well as could be expected," said Corso.
