No More Double Vision

WE’RE HEARING that the Consumer Financial Protection Bureau will be issuing new guidance on loan officer compensation in June. And that guidance will eliminate “double counting” of LO compensation when a borrower pays an upfront origination fee.

The final qualified mortgage rule issued in January requires lenders to count compensation paid to loan officers towards a 3% point and fees cap along with an origination fee.

It is generally assumed that origination fees will be used to pay the LO. If the borrower pays an upfront fee of $100 and the LO receives $75 in compensation, should the lender count $175 toward the points and fees?

This approach raised a lot objections from lenders and brokers. And it didn’t take long for the bureau to propose an alternative.

The proposed rule asked for comment on an alternative that allows lenders to offset the amount of LO originator compensation by the amount of finance charges paid by the consumer.

The comment period ended in March. And the CFPB appears to be moving away from its initial reading of the Dodd-Frank Act, according to sources.

It seems there is more understanding that adding the origination fee and LO compensation together doesn’t make a lot of sense.

First, double counting would result in more loans becoming non-QM loans, because the fees would exceed the 3% cap. Second, double counting doesn’t seem to provide much in the way of consumer benefit or protection.

It also seems the proposed rule was slanted toward eliminating double counting.

Since the issuance of the QM rule and other mortgage rules in January, the CFPB has been making adjustments to ensure the new rules don’t inhibit current levels of lending. The CFPB understands that credit is tight. And no one in Washington wants to make it any tighter.

SHOUT OUT to the whole mortgage industry for hiring 1,600 new people in March, according to the Bureau of Labor Statistics. Each week we salute anyone in the industry that makes ten net new hires, feeling that private sector hiring will take us out of our tepid economic recovery. This week, we salute the whole industry! Industry headcount contracted from about 500,000 to about 250,000 during the mortgage bust, so there’s still a long way to go. But it’s a step in the right direction.

HOTTEST BLOG: Garth Graham’s blog this week about “Failing the Mortgage SATs” has generated a ton of responses, some on point and some off point (one commenter implied that Garth, who spent 25 years in mortgage banking, had never seen a 1003). We’re happy to report he has several more on this theme coming. His thesis (academic pun intended) is that the mortgage business has no equivalent of the SAT to test customer satisfaction. Click the link above if you want to congratulate him or take issue with him!

MOST READ/EMAILED content on our site this week was Bonnie Sinnock’s story detailing a mortgage fraud, a topic of eternal interest to those who may get dinged by it. This one has a happy ending—looks as if someone is going to the pokey for it. Most emailed this week is Brad Finkelstein’s item on Zillow’s latest conclusions.

OH THOSE VINERS: Our posters at mortgagegrapevine.com are interested in just about anything under the sun. The IRS, Fox News, Benghazi, even a few loan scenarios were on their mind this week. Check out our discussion board and add your voice to those of our totally original contributors.

Mark Fogarty is editorial director of the SourceMedia Mortgage Group and has been commenting on the mortgage market since 1984. Brian Collins is the group’s senior editor and D.C. bureau chief. He has worked the mortgage beat since 1988.