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.