CFPB To Propose “Problematic” Compensation Rule For Reverse Mortgages?

The most recent update on loan originator compensation rules outlined by the Consumer Financial Protection Bureau could be “problematic” for reverse mortgage lenders.

The rules, which are expected to be proposed formally this summer and finalized by January 2013, will make additional changes to the loan originator compensation rule issued by the Federal Reserve Board in April 2011.

National Reverse Mortgage Lenders Association counsel explained in a memo to NRMLA members why the changes need some clarification and change for their application to reverse mortgage loans.


Dodd-Frank allows loan officers to be paid by consumers but does not allow for an upfront payment of origination points or fees other than third-party fees not retained by the creditor, the loan originator or either company’s affiliates, writes NRMLA legal counsel, Weiner, Brodsky, Sidman, Kider, PC in the memo. It basically provides that if a lender will pay a broker “back end fees,” the consumer could not have paid upfront points in the transaction. The restriction is known as the “points and fees provision,” the memo states.

The Bureau can create exemptions to the “points and fees provision” if it finds that such action is “in the interest of consumers and in the public interest,” the memo explains. With respect to creditor paid compensation, the CFPB has stated it is considering exercising its exemption authority to issue a partial exemption to the “points and fees provision” and would permit consumers to pay certain upfront points and fees in retail and wholesale loan transactions when the creditor compensates an LO, as long as the origination fees are “flat” and do not vary with the size of the loan, the memo continues.

“This proposal would be problematic for HECMs because the HECM origination fee is set by statute and based on the loan amount,” writes Weiner, Brodsky, Sidman, Kider. “NRMLA is reaching out to Bureau personnel regarding this issue.”

View the new rules under consideration.

Written by Elizabeth Ecker

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  • My feelings are well known about what havoc the CFPB is perpetrating on our industry and the financial industry as a whole.

    The article, as far as I am concern, gives us no real details. I am not blaming Elisabeth for this, I am sure she is limited to what information she is given. However, you can bet the changes will have an adverse impact on everyone, once again.

    I ask myself why? Why does there have to be so many changes all the time. What reason and methodology is behind the CFPB for bringing this up in a way that it is like a warning that, “We are going to get you again”!

    Why were the changes thought out better when they were first made. Did the CFPB just want a show of muscle out of the gate? It is evident that the plan that was released and that we live with today has many problems and complexities to it. Are we to see another formula that will rock us all once again into a state of confusion?

    As I have said before, enough is enough. The CFPB are starting to appear as a bureau that is out to manufacture rules and regulations as well as changes just for the sake of making rules, regulations and changes! In short, is all of this really helping the consumer in the long run? I don’t think so!

    John Smaldone

    • John,
      Thanks for your comment. The rule is not yet proposed, rather it has just been hinted, so it is hard to know the real impact. But NRMLA is working on the issue, according to the memo noted in the article. I’m sure we will know more soon.

      •  Liz,

        I appreciate your reply. I know the rule is not proposed as of yet but they are working toward it. You did well with the article you wrote, I know you did not have a lot to go by.

        There are enough rumbles out there, which I believe some are announced on purposed, to give us all an idea of what is to come!

        I still fall back on what I said in my comment above. Again, I appreciate that you replied to me, make it a great day and keep up your good work!

        John A. Smaldone

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