Groups Reply to Fed on LO Compensation Rule Delay; Court Lifts Stay (update)

The U.S. Court of Appeals today dissolved the stay that had been granted on a delay in the implementation of the Federal Reserve Board’s loan officer compensation rule, putting the rule into effect.

“Clients should be prepared to implement their plans for all loans on which an application is received on or after April 6, 2011,” said a statement from Weiner Brodsky Sidman Kider PC. “While the case may proceed on the merits, if the plaintiffs chose to do so, the Rule is effective immediately and clients should not delay.”

The National Association of Mortgage Brokers (NAMB) and the National Association of Independent Housing Professionals (NAIHP) earlier today filed a joint reply brief in the U.S. Court of Appeals in response to a court-granted stay on implementation of the Federal Reserve Board’s loan officer compensation rule, originally scheduled to take effect on April 1. The response followed an opposition statement from the Fed, which was filed yesterday.


NAIHP President Marc Savitt told RMD prior to the announcement that a lifted stay would not prevent further litigation, but it would likely mean the rule would go into effect pending further action.

View the court decision.

Written by Elizabeth Ecker

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  • However, if the court had extended the stay, it would have been a much more positive sign that this court believed that the Fed rule could be overturned. This is but one court; however, it is an appellate court. Either the attorneys for the plaintiffs believe that the Supreme Court will not hear their petition for a stay or they have no legal grounds to appeal it further.

  • The Fed’s rule on originator compensation, along with recent changes in licensing and disclosure requirements, poses an existential threat to the mortgage broker industry. This mortgage broker has decided to go out of business and reopen as a branch office of a direct lender.

    • HECM Dude,

      You are simply capitulating to the position that the consumer advocates want. HOWEVER, that does not make your decision a bad one.

      It seems the next attack from consumer advocates against the mortgage industry as a whole will be on what constitutes a branch. The rumblings of that assault could be heard, buried in the remarks of one HUD official at the NRMLA conference in Newport Beach when he gave a pointed one-liner about “net branches.” You may very well be running out of the frying pan directly into the fire.

      Like many other regulated industries, private ownership changes over time even though the real players do not. Perhaps your conclusion is premature but even the timing is a decision you must make.

      Once the lender playing field shrinks down yet further, the true nature of the CFPB will surface and we will see where we are headed. With capacity qualification and the future of the lending limit still very much in question, the assaults on our industry are just beginning. Some of the attacks will be against the mortgage industry as a whole with our industry as an after thought at best. Other will be specifically AIMED at us.

      I hope your decision proves to be THE best answer for you.

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