Since publishing its loan officer compensation rule in September, the Federal Reserve Board has been wary of providing written guidance on compliance issues to the industry — but the Mortgage Bankers Association wants to change that.
Fed staff has provided verbal advice to lenders and loan brokers, but this is "insufficient" and written guidance is needed, MBA says in a Dec. 16 letter to Federal Reserve chairman Ben Bernanke.
"If guidance is not forthcoming, many lenders may be forced to be very conservative and implement compensation and loan pricing structures that provide for fixed compensation for originators at a level that can only be supported by high loan prices to consumers," warns MBA president John Courson.
The Fed rule permits LO and mortgage broker compensation based on the loan amount, but the rule that goes into effect April 1 prohibits compensation based on other loan terms/conditions to prevent the steering of borrowers into more expensive and risky loans.
MBA included a set of questions and answers in the 19-page letter to the Fed chairman, which is designed to solicit written responses.
In some instances, MBA questions whether the Fed's verbal advice is "appropriate" and the Q&A suggests a "better response" that is consistent with the rule. "If the Board cannot provide written guidance prior to the implementation date, we respectfully urge that it postpone implementation of the rule pending such guidance."
