CFPB Proposes New Rules on LO Comp, Mortgage Originating

The Consumer Financial Protection Bureau today released new proposed rules regarding mortgage origination and loan origination compensation. The proposed changes were made in an effort toward more greater accountability to the mortgage market, the bureau says.

Among the changes: requiring lender to make a no-point, no-fee loan option available, requiring an interest rate reduction when consumers elect to pay upfront points or fees, and implementing additional requirements for loan originators in terms of background checks, training and steering.

“Consumers have a hard time comparing loans when they are dealing with a bewildering array of points and fees,” said CFPB Director Richard Cordray. “We want to provide consumers with clearer options and enable them to choose the loan that they believe is right for them.”


With respect to reverse mortgages, the bureau clarified interpretation of “amount of credit extended” as it related to compensation. The CFPB specifies the “initial principal limit” rather than the “max claim amount” is the interpretation to be used.

Because government-insured reverse mortgages fall under many of their own rules under the Department of Housing and Urban Development and Federal Housing Administration, the industry has asked for reverse mortgage exceptions with many of the rules that are currently being made.

The current rule making is open for comments through October 16, with a final rule expected in January 2013.

View the proposed rule summary.

View the proposed rule.

Written by Elizabeth Ecker

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  • I still grapple with the fact that a government agency is imposing rules on private business. If a consumer purchases a car from dealer A for 17k and later finds out they could have purchased the same car for 16K, is it the governments job to come in and say, “:Hey you can’t do that!.”
    Is it their role to tell private companies how to pay their employees? Do they tell Realtors they can’t have plans based on the terms and conditions of a sale??? Do they tell insurance companies they can’t pay a residual fee to their employees based on the premium they collect??
    Perhaps LO’s should begin receiving residual income based off the rate or servicing fee lenders charge?
    The CFPB has done one thing: They have created a nice platform for big banks to pay less and for large independents to do the same. Where does the CFPB believe all that extra income our employers receives ends up…. In the pockets of the consumers????? Duh!

    • Joedirect,

      It seems you (and I) just do not get it!

      By raising the income tax rates of those with the highest income tax rates, by returning dividend income to the ordinary income (income tax) category, and by funneling more taxable income to corporations and their corporate owners, the taxable income base and the most costly types of income rise for corporations and individuals with the highest income tax rates rise producing more income taxes to pay for the CFPB!

      You also leave more net income for the businesses to grow. All you had to do was pay originators a “little” less money to level the compensation paid for the “same” services.

      People like you (and I) just do not get it!  In this way the CFPB can become a self supporting and self sustaining bureaucracy raising the kind of money needed to balance the budget while helping (?) the businesses which support it. (COL)

    • Sometimes you have to do more then sit back and “pray”.  Use your voice…and tell your elected officials this is unacceptable.  Use the vote you are given in this democratic society to get rid of the current administration.

  • I also have a problem with Big Government interfering
    with private business, and the analogy using the car sale is dead on. But alas,
    this is where we are and this is where will stay. Dodd/Frank and CFPB is not
    going anywhere regardless off the outcome of the upcoming elections. Brokers
    and LO’s have absolutely no say in anything that is being done, we have NO
    voice, period. All we can really do is keep adjusting to whatever “Make No Sense
    Changes” take place and find ways to persevere. I really believe that they are surprised
    that we are even still around at this point. I am pretty sure they figured with
    all the changes, licensing requirements, comp plans that we would be long gone
    and our industry would be left in the capable hands of the big banks the way it
    should be, because we all know they are the only ones with the integrity to
    work with consumers on the biggest financial decisions of their lives.

    • Eric,

      You have it absolutely backwards (per them).  

      If it was not for all of the changes, regulations, oversight, additional regulator (the CFPB), we would all be gone.

      The Barney Frank and Chris Dodd types believe they are adding consumer confidence and making it so consumers have rights and can come confidently back into the mortgage marketplace.

      If you do not believe me, just ask “them.”

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