No one has ever accused Marc Savitt of being a wallflower, which is probably a good thing, because anyone who's meek in nature probably wouldn't be taking on the Federal Reserve Board.
In particular, Savitt's young trade group, the National Association of Independent Housing Professionals, plans to sue the Fed over its looming loan officer compensation rule, charging that the regulation is illegal and should be withdrawn because the agency "failed to demonstrate even a remote correlation between a mortgage loan originator's compensation and abusive, deceptive or unfair practices."
(Two weeks ago a division of the Small Business Administration officially asked the Fed to postpone the April 1 implementation date of the rule, saying the central bank did not provide "sufficient" or "proper" guidance for small mortgage firms and loan brokers to comply with the new requirements.)
Anyone who's familiar with Savitt, a past annual president of National Association of Mortgage Brokers, knows he's a well-spoken industry veteran who originates mortgages for a living, and prides himself on being a student of regulation. To him, the Fed's LO rule will not only hurt brokers (perhaps, put them in the grave for good), but reduce loan choices for consumers, and (worst of all) leave the mortgage industry squarely in the hands of the nation's megabanks, namely Wells Fargo, Bank of America and JPMorgan Chase.
And what bothers this West Virginia-based mortgage salesman the most is that loan brokers have been blamed for the mortgage mess—without a fair trial—and Wall Street and the big banks have walked away from the car wreck, mostly scratch free and richer. (He favors licensing and testing but is dismayed that depository LOs don't have to take the same tests he takes.)
In his book, brokers are being hung out to dry with the instrument of punishment being the Fed's LO comp rule.
Under the regulation payments to a loan officer (be it a loan broker or otherwise) cannot be based on a loan's interest rate or other terms. Also, the Fed is banning LOs from receiving compensation payments from both a borrower and a lender on the same deal.
At the very least, Savitt plans to ask a Washington court for a temporary restraining order to halt the rule, in the hope that he can plead his case more successfully with the new Consumer Financial Protection Bureau. He feels his meetings with the FRB staff, including the agency's point man on the issue, staff attorney Paul Mondor, have gone nowhere.
In particular, both NAIHP and the Mortgage Bankers Association would like some type of written clarification on the rule and how it might be carried out. The response from the Fed, though, has been stone silence.
Meanwhile, Mondor and other Fed officials have declined to talk about the rule with the media.
In a recent e-mail exchange between Savitt and Mondor, Savitt angrily wrote, "Would you like to see some of the e-mails I get from brokers and originators, who plead with me to save their families' only source of income, now jeopardized by your rule? These folks have hung on for four years. Don't tell me this is about consumer protection!"
So, Marc Savitt is going to sue, not right away, he says, but soon. But the young NAIHP has little in the way of resources and sees itself as a David to the Fed's Goliath. Savitt says he is receiving donations to fund the lawsuit from rank-and-file LOs, but admits that at least one larger financial backer has stepped away from the cause, at least for now.
"I'm getting donations of $200, $250 at a pop," he said. "I had one LO give me $1,500. Yes, we're looking for money."
