SBA Wants Federal Reserve to Delay Originator Compensation Rule

The Office of Advocacy for the Small Business Administration (SBA) submitted another letter requesting the Federal Reserve Board (FRB) delay implementation of its loan officer compensation rule.  The proposal, is meant to protect consumers from originators steering consumers into high cost loans is scheduled to go into effect on April 1, 2011.

Despite publishing a small business guide, the SBA still feels the FRB fails to include a description of actions needed to meet the requirements of a rule, to enable a small entity to know when such requirements are met.

“The guidance answers almost none of the questions that the industry has about the rule and view it as simply a summary of a complex issue and not guidance on how to comply with the requirements of the rule,” said the letter.

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Earlier this week, the Fed said it does not plan on finalizing three proposed rules related to mortgage disclosures, but failed to mention anything regarding its loan originator compensation guidelines.

The National Association of Mortgage Brokers has also asked the FRB to delay implementing the rule.  The association called the rule a “game changer” that could have significant impact on the industry.

“The inevitability and uncertainty of this future rulemaking is very unsettling for our industry as we contemplate significant changes to our business models and practices in order to comply with the Board’s Rule,” said Michael J. D’Alonzo, President of the NAMB in the letter.  ”In an already turbulent market, what we really need are clear lines and objective parameters within which to operate our businesses.”

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  • The April 1 compensation ruling is clearly anti-small business and pro-big bank. I hope the Fed sees the many flaws in it and delays its implementation, while significantly amending it.

  • The April 1 compensation ruling is clearly anti-small business and pro-big bank. I hope the Fed sees the many flaws in it and delays its implementation, while significantly amending it.

  • They should just call it what it is – an agenda to push brokers out of the business. That will actually hurt borrowers. Whenever we are competing with lenders, we always win because we will lower our costs whereas they won’t. We can show a borrower the best of what seven different lenders have to offer, whereas a lender representative can only show their offerings. They should be helping us help the consumers, not taking all the choices for them away…

  • They should just call it what it is – an agenda to push brokers out of the business. That will actually hurt borrowers. Whenever we are competing with lenders, we always win because we will lower our costs whereas they won’t. We can show a borrower the best of what seven different lenders have to offer, whereas a lender representative can only show their offerings. They should be helping us help the consumers, not taking all the choices for them away…

  • The banks, not brokers or originators, caused the meltdown. By punishing brokers and originators with its rule on compensation, the Fed is shooting the messenger.

    • HECM Dude,

      I am not associated with a big bank but as to the mortgage issue but I think your statement is a little over the top. When it comes to the housing demise, mortgage brokers did their fair share of the damage.

    • HECM Dude,

      I am not associated with a big bank but as to the mortgage issue but I think your statement is a little over the top. When it comes to the housing demise, mortgage brokers did their fair share of the damage.

  • The banks, not brokers or originators, caused the meltdown. By punishing brokers and originators with its rule on compensation, the Fed is shooting the messenger.

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