Among the new mortgage rules going into effect under the Consumer Financial Protection Bureau this coming fiscal year, most do not impact reverse mortgage lenders directly.
However, they still stand to have an effect on how business is done, especially with regard to loan originator compensation, panelists in a recent National Reverse Mortgage Lenders Association webinar noted.
“The biggest impact is going to be the LO comp rule,” said legal counsel Jim Milano, of Weiner Brodsky Kider PC, which represents NRMLA.
The loan originator compensation rule, however, applies only to closed-end credit transactions, namely fixed rate loans among reverse mortgages, which have become the minority following the elimination of the fixed rate standard product in April. For those fixed rate Saver loans in the market, lenders need to be aware of the changes.
“The rules apply more broadly to wholesalers that compensate originators as opposed to the retail LOs,” Milano said.
The CFPB has already made some headway on enforcing compensation rules, and is likely to continue to do so.
“It looks like the bureau’s going to be out there actively looking at these things,” Milano said, referencing a recent lawsuit filed by the CFPB against a Utah lender over loan originator bonuses. “The bureau is watching; it would be prudent for companies to review comp plans and make sure they are up to speed.”
As for future changes to be anticipated by the Bureau, rules beyond those that have been published as of yet are unknown. However, there may be some signals as to what to expect, given the rules previously proposed by the Federal Reserve that were never made final.
“If you want to know that future holds, look back to the past,” Milano said, noting the Bureau’s recent reverse mortgage study, and a previous Fed proposal for amended reverse mortgage disclosures.
“There’s likely to be more against cross selling, more counseling requirements and more rules around advertising,” Milano said. “Some may not want to be in this business because it’s costly to comply, but if you can stay in, there will be less competition.”
Written by Elizabeth Ecker