It was announced this week that the Consumer Financial Protection Bureau is planning on issuing a proposed rule changing the current loan officer compensation laws in the near future. The proposed changes-which could go into effect sometime in the middle of next year-would revise the current law to permit downward deviations in a loan officer's compensation for certain types of low-cost mortgage loans usually reserved for low-to-moderate income borrowers.
In addition, there is some speculation out there that the loan officer compensation rule would permit downward changes in compensation to avoid borrowers being impacted by things such as rate lock extensions. Of course, there is more concern over this proposed change as some believe it could be manipulated to artificially adjust loan officers' compensation based upon loan terms.
If, in fact, the loan officer compensation rule accomplishes these changes without creating further confusion and/or restrictions in the compensation of loan officers, it could certainly ease some of the challenges mortgage lenders currently face in complying with loan officer compensation rules. Indeed, many companies have altogether ceased participating in bond and CRA programs because the compensation needed to pay originators on other types of loans to remain competitive, preclude any profit from engaging in these types of lower income lending. By creating "dual" compensation plans, consumer groups pushing this change believe there would be additional access for lower income borrowers.
Since consumer groups support it and one would think most banks would approve of the measure, it appears there is a good chance of this change being accepted. If so, it would be welcome news to all concerned and resolve some of the problems with the current rule. Experience, unfortunately, suggests that every time the government fixes a problem through additional regulation, it creates two more problems. Of course, only time will tell how this will all play out and whether this occurs. The actual loan officer compensation rule proposal is due out in the next few weeks. Stay tuned to see what happens with it.
