The New York Times is reporting that the new compensation rules from the Federal Reserve will require that brokers offer the lowest possible interest rate and fees for which they qualify.
The new rule, which goes into place on April 1, is known as the Loan Originator Compensation amendment to Regulation Z, part of a strengthened Truth in Lending Act passed by Congress in 2008. Designed to prevent consumers from being steered into high-cost, risky loans, it covers how a loan originator — or any person or company that arranges, obtains and/or negotiates a mortgage for a client — is paid.
Thomas Martin, the president of America’s Watchdog, told the NY Times, the yield spread premiums that brokers were previously paid “a rip-off” and said the Fed rule was “very welcome.” Brokers don’t agree.
Mark Yecies, an owner of SunQuest Funding, a mortgage broker and lender in Cranford, N.J., told the Times, “it unfairly makes these brokers less competitive” against the big banks.” He added that “bigger banks will capture a bigger percentage of the origination market, and they will raise rates.”
Mike Anderson, a director at the National Association of Mortgage Brokers, said that the rule would “likely put a lot of independent brokers out of business.”