Mortgage Committee Seeks Consistency with Loan Originator Compensation Guidelines

Examiner guidelines for the consistent implementation of the Federal Reserve Bank’s final rules for closed-end credit under Regulation Z were recently released by the Multi-State Mortgage Committee, a ten-state representative body created by the Conference of State Bank Supervisors (CSBS) and the American Association of Residential Mortgage Regulators (AARMR).

The rule includes loan originator restrictions that were set in place to protect consumers against the “unfairness, deception, and abuse” that can occur from certain origination compensation practices, and prohibits payments to loan originators based on loan terms and conditions, dual compensation to originators by consumers and any other person, and “steering” consumers to certain loans that would net them greater compensation.

“The guidelines developed by the MMC provide examiners in the field with a standardized set of procedures for evaluating basic compliance with the rule,” said Darin Domingue, Deputy Chief Examiner of the Louisiana Office of Financial Institutions and President of AARMR, in a statement. “Utilization of these guidelines will facilitate more consistency among state regulators when implementing their own policies and procedures to ensure compliance with the rule.”


The MMC conducted extensive industry outreach for feedback as it developed the guidelines, in an effort to increase the transparency of mortgage supervision, said John Ryan, President and CEO of CSBS.

The guidelines include three modules, two of which are completed by the institution, with the third filled out by the examiner, who assesses the institution’s answers in addition to conducting transaction level reviews and staff interviews.

Examiners are advised to test for dual compensation by checking to see whether borrowers paid any fees to brokers, and if those brokers also received payment from any other person.

The modules also provide tests to detect “steering.” In cases were steering is suspected, the examiner must check it against similar loans made by the loan originator, to find out if the LO gets more compensation on certain loans, and to determine if the loans were not in the borrower’s interest.

Download the MMC guidelines here.

Written by Alyssa Gerace

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  • What do they propose to do about borrower poor decisions based on bias and prejudice?  The media has so oversold the value of fixed rate products that in our industry it results in seniors taking far more cash at funding than they can reasonably manage.

    Regulators have so overstressed the risks of adjustable rate products that some seniors seem lost on the subject.  If Congress needs Econ 101, regulators need it far more.  The overgeneralizations are so bad, one cringes every time any regulator speaks on a subject s/he clearly does not understand.

  • This sounds like more of a witch hunt than anything.
    Are these so called examiners former reverse mortgage loan officers who have
    actual experience in the field and would even know what types of scenarios
    would cause certain borrowers to fit all the different options? I am guessing
    that these people will be formally trained government employees in a 6 week
    crash course, just what we need, more government intervention.

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