The House Financial Services Committee will examine the implementation of the Federal Reserve’s rule that changes the compensation model for mortgage originators prior to the effective date of April 1. The committee said it’s concerned the rules may have an adverse impact on the ability of small businesses that originate mortgages to remain in business.
Drafted earlier this year, the Fed’s rule is designed to prevent compensation based on a loans terms or conditions and to prohibit steering a consumer into a higher rate to receive additional compensation. The Mortgage Bankers Association joined other trade groups in asking the Fed to delay the implementation of the rule.
“The Rule is far-reaching and requires major changes to long-operating compensation practices that heretofore have been both legal and prevalent,” said the MBA. “Unfortunately, in our view, the Rule does not definitively address many matters of particular importance, and has engendered numerous questions from creditors and loan originators seeking to comply.”
The National Association of Mortgage Brokers praised the committees decision to look into the proposal. The association called the rule was a “game changer” for the mortgage industry and argued that mortgage brokers and lenders are ill-equipped with how to fully comply.
For a copy of the committee oversight plan, see here.