The National Association of Independent Housing Professionals on Monday sued the Federal Reserve Board in U.S. District Court, seeking to block the agency's controversial loan officer compensation rule, which becomes operative April 1.
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.
NAIHP president Marc Savitt said he believes the rule is illegal and should be withdrawn because the agency "failed to demonstrate even a remote correlation between a mortgage loan originator's compensation and abusive, deceptive or unfair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."
In early February, 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.
At press time a spokeswoman for the agency said, "We are not able to comment on this action."
NAIHP's motion was filed in the District of Columbia.
The trade group was formed in early 2010 by Savitt, a West Virginia loan broker, and a past annual president of the National Association of Mortgage Brokers. (NAMB is not a party to the filing, and is planning a separate lawsuit against the Fed.)
In a recent interview with National Mortgage News, Savitt said the LO rule will not only hurt brokers, but reduce loan choices for consumers, and leave the mortgage industry squarely in the hands of the nation's megabanks, namely Wells Fargo & Co., Bank of America, and JPMorgan Chase.
