NAIHP prepares to sue Federal Reserve for originator compensation rule changes

The National Association of Independent Housing Professionals (NAIHP) is preparing to take legal action against the Federal Reserve Board for its loan originator compensation rule according to a statement posted on its website.

“NAIHP anticipates our suit will be filed within the next ten days,” said the group.  “As mentioned in previous announcements, our first order of business will be a temporary restraining order (TRO), to stop the April 1st implementation.”

NAIHP argues the Fed’s new regulation is illegal because the agency “failed to demonstrate even a remote correlation between a mortgage loan originator’s compensation and abusive, deceptive or unfair practices.”


Drafted last year by the FRB, the rule was intended to prevent mortgage brokers and loan officers from increasing their own compensation by raising consumer loan costs, such as by increasing the interest rate or points.  However, the NAIHP said the rule “eliminates competition, which increases costs for consumers and creates more business failures for small business.”

The NAIHP has hired Howrey, a Washington, DC, based law firm to handle the lawsuit and is asking the mortgage industry to contribute to the legal fund.  “We guarantee every dime of your contributions will go to the legal action, and any unused portion of the funds will be refunded on a prorated basis,” said the group.

Other trade groups including the Mortgage Bankers Association, the Small Business Administration, and National Association of Mortgage Brokers have all requested the Fed delay the April 1 implementation date.

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  • NAIHP has it right, just as I’ve been pointing out here for several months. Thousands of small businesses will close as a result of this rule, and consumers will be hurt by reduced competition and higher costs. I’ll be making a donation and I suggest that everyone else does too. Also, go online and write a brief note to your representatives in the House and Senate (it only takes a minute and they WILL see it).

  • If there is any hope for deferral of the implementation date it seems the only course left open by the Fed is the TRO route. Will it be successful???

    It is very doubtful if NRMLA or any organization dominated by the largest financial institutions will support the suit.

  • This is what we need, our industry leaders standing up and defending our position. If this comp plan holds fast and true, we will lose many good people from our pool. I guess you can say we will rid the industry of the predators as well?

    The point is that those are career individuals and doing justice for our seniors will find their income cut in half or maybe more. These folks do not deserve this.

    By the way, NAMB is also filing suit. If enough of the big boys follow through, we may see an injunction to delay the implementation of the new rule, I hope!

    Does NRMLA have any plans to follow with a suit on our behalf?

    John A. Smaldone

    • John,

      Who are the “big boys” you are referring to?

      Why would NRMLA? It represents parties on both sides of this issue. It is addressing some questions but is mainly petitioning for delay per their latest Monday release.

      • Hi Cynic,

        I was referring to NAMB and NAIHP. As far as NRMLA filing suite, who are you referring to when you say they represent both sides?

        I know about the delay request on the part of NRMLA and we all appreciate their action. I was not putting NRMLA down when I asked the question, on the contrary. Because of the other, as I referred to, big boys filed, I just was looking to see what NRMLA was going to do.

        I may not be understanding you when you say both sides, who is the other side? I appreciate.

        John Smaldone

      • John,

        Perhaps I have misunderstood you or the situation. As I understand the issue, it is not so much retail originators of major lenders where the problem lies but rather it is one brokers are very concerned about. It would seem that in a competitive market sense if an issue harms another segment which has the potential to give me a competitive advantage….

        NRMLA represents players on both sides of the issue. So while the NAMB has a real interest in the outcome, NRMLA must remain neutral other than trying to get questions answered. The latter is exactly what NRMLA seems to be doing.

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