The new rule, which goes into place on April 1, is known as the Loan Originator Compensation amendment to Regulation Z, part of a strengthened Truth in Lending Act passed by Congress in 2008. Designed to prevent consumers from being steered into high-cost, risky loans, it covers how a loan originator — or any person or company that arranges, obtains and/or negotiates a mortgage for a client — is paid.
Thomas Martin, the president of America’s Watchdog, told the NY Times, the yield spread premiums that brokers were previously paid “a rip-off” and said the Fed rule was “very welcome.” Brokers don’t agree.
Mark Yecies, an owner of SunQuest Funding, a mortgage broker and lender in Cranford, N.J., told the Times, “it unfairly makes these brokers less competitive” against the big banks.” He added that “bigger banks will capture a bigger percentage of the origination market, and they will raise rates.”
Mike Anderson, a director at the National Association of Mortgage Brokers, said that the rule would “likely put a lot of independent brokers out of business.”