The National Association of Independent Housing Professionals said it will sue the Federal Reserve over its looming loan officer compensation rule, charging that the regulation is illegal and should be withdrawn because the agency "failed to demonstrate even a remote correlation between a mortgage loan originator's compensation and abusive, deceptive or unfair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."
NAIHP is managed by Marc Savitt, a West Virginia loan broker and a past president of the National Association of Mortgage Brokers.
Under the Fed's compensation rule, payments to an LO (be it a loan broker or otherwise) based on a loan's interest rate or other terms are prohibited. Also, the Fed is banning LOs from receiving compensation payments from both a borrower and a lender on the same deal.
About a week ago the Small Business Administration officially asked the Federal Reserve to postpone the April 1 implementation date of its LO 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.
Savitt believes SBA's announcement is a proclamation that the Fed "did not follow the law."
At the very least, his group is seeking a temporary restraining order against the Fed. But NAIHP may be facing long odds. The young trade group is less than a year old and operates on a shoestring budget. 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.
A spokeswoman for the Fed said the agency would not be commenting at this time. NAIHP hopes to file its legal motions within a month or so.
