Lessons Learned from the LO Compensation Debate

The (combined) lawsuit filed by the National Association of Independent Housing Professionals, and the National Association of Mortgage Brokers against the Federal Reserve Board will be decided next week or so we're told by NAIHP chief Marc Savitt. (The two groups are suing the Fed over its loan officer compensation rule, feeling the regulation is unfair, illegal, bad for consumers, bad for small business - take your pick.) But let's back up for a second. Banking regulators have never liked loan brokers because, among other things, they don't have "skin in the game." Brokers don't fund loans - they facilitate them. The real risk belongs to the actual funders, though I've heard plenty of stories of brokers being forced to make good on their bad loans too. Now, let's take a look at the servicing side of the industry. It's the regulators who are now toying with reducing servicing fees to zero which would give servicers no skin in the game. Is this a crazy mixed up industry or what?