The Federal Reserve Board responded on March 18 to lawsuits filed by the National Association of Mortgage Brokers and the National Association of Independent Housing Professionals that would delay implementation of the Fed’s loan officer compensation rule. The response denied the claim of both associations that the rule would cause imminent, irreparable harm to loan officers and their business.
In addressing the NAIHP suit, the Fed wrote that “NAIHP has failed to demonstrate any imminent, irreparable harm as a result of the Loan Originator Rule. NAIHP is unable to substantiate any imminent, actual economic loss of any severity. And its self-serving, unsupported statements predicting the hardships that might arise under the Rule are insufficient to establish irreparable harm. A claim that government regulations will have an economic impact on regulated parties is not tantamount to establishing irreparable harm sufficient to warrant injunctive relief.”
Similarly, in response to NAMB’s claim, the Fed wrote that NAMB has also failed to show that the claimed economic harm to its members is so severe as to meet the high standard for irreparable economic harm.
“As we have shown, the costs of complying with regulation of a business are not sufficient to warrant extraordinary relief unless they threaten the existence of the business,” the Fed wrote.
The response concluded that although the rule may prevent loan originators from continuing some employee compensation models that are currently in use, the evidence submitted fails to demonstrate that originators can’t comply with the new rule while continuing to maintain their businesses.
The rule is still scheduled to go into effect on April 1. Over the past week, some lenders have released new compensation guidelines to their originators, scheduled to take effect in advance of the April 1 implementation date.
At a National Reverse Mortgage Lenders Association Conference last week, NRMLA told members not to wait for April 1 and that it was unlikely implementation of the rule would be delayed.
Written by Elizabeth Ecker