As the Consumer Financial Protection Bureau gathers information in the process of developing a new rule in loan originator compensation, one industry trade group is making an alternative suggestion: Forget about LO comp rules for Fannie Mae, Freddie Mac and Federal Housing Administration loans.
The agency has exemption authority to deem certain types of loans as not falling under the final rule. Use that authority, urged the National Association of Mortgage Professionals on its website.
“As an alternative to the proposed changes in mortgage loan origination standards, the CFPB should exercise its exemption authority under Dodd-Frank, by specifically exempting all prime/traditional and government loans from the MLO Compensation regulations, while retaining the proposed restrictions for high cost and subprime mortgages,” NAIHP writes.
The CFPB has been in conversation with industry representatives over the course of the last several weeks as it gains information that will direct its rule making. The final rule must be made by January 21, 2013, under the Dodd-Frank law, following a proposed rule and comment period.
Mortgage brokers and lenders have expressed concern as well as some confusion about how a CFPB rule regarding points and fees would impact their compensation. For reverse mortgages, the compensation for which is set by the statute, the impact is also unclear.
An exemption for certain types of loans would accomplish the initiative the law set out to achieve, while causing less of a burden, NAIHP writes.
“It would eliminate any incentive for placing a prime qualified borrower in a high cost mortgage for the purpose of greater financial gain and would be a far less burdensome solution. Moreover, it would establish a firewall to protect consumers from steering, while restoring consumer choice to the prime market. We urge the CFPB to adopt this alternative.”
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