The Community Mortgage Banking Project on Friday submitted an amicus brief in support of mortgage brokers who are trying to convince a U.S. district court in Washington to block the Federal Reserve's loan officer compensation rule which goes into effect late next week.
"The final rule mistakes ordinary profit in lending transactions for unfair and deceptive practices," according to the brief CMBP filed in support of lawsuits filed by the National Association of Mortgage Brokers, and the National Association of Independent Housing Professionals.
The Fed's rule "micro-manages" the way mortgage bankers pay their loan officers and restricts incentives based on profitability, the CMBP amicus brief says. (The trade group represents mortgage originators that fund loans in their own name. Its membership does not include brokers.)
CMBP managing director Glen Corso noted that the Fed's rule was issued to prevent LOs from raising the cost of mortgages to increase their compensation. "But it has ended up depriving loan officers of the ability to discount the mortgage rate to the consumer and absorb the cost of that discount by reducing their compensation," Corso said.
The NAMB and NAIHP lawsuits are before Judge Beryl Howell. The judge is expected to rule on the case some time next week.
