The National Association of Mortgage Brokers (NAMB), in an effort to fight to preserve and protect the mortgage broker which could impact credit opportunities to consumers, has filed a lawsuit against the Board of Governors of the Federal Reserve System (Fed) seeking temporary and preliminary restraints to delay implementation of the loan originator (LO) compensation rule (Regulation Z; Docket No. R-1366, Truth-in-Lending) to be enacted by the Federal Reserve Board’s Final Rule on April 1st. NAMB has assembled a team of nationally renowned law firms, including Saul Ewing LLP and Herman, Herman, Katz & Cotlar which filed the lawsuit in United States District Court for the District of Columbia against the Fed in the afternoon of Thursday, March 9.
The basis of the suit is based on the rule prohibiting mortgage brokers from paying their loan officers commissions from fees paid by the consumer. The lawsuit makes a case that the Federal Reserve Board's Rule, as presently drafted, will "cause devastating and irreparable harm to small business mortgage brokers, their loan officers and their entire staff as of its April 1, 2011 implementation date." In the suit are affidavits from various industry experts and letters from the Mortgage Bankers Association (MBA) and the U.S. Small Business Administration, Office of Advocacy (SBA Advocacy) warning the Federal Reserve about the unintended consequences of this Rule against small business and its potential to limit access to mortgages for consumers. NAMB is looking for the Federal Reserve to avoid the effects of its "arbitrary and capricious rule by withdrawing this section of the Rule and allowing the Consumer Financial Protection (CFPB) to perform its mandated responsibilities in this area."
"This has been a historical day in the 38-year history of NAMB," said Mike Anderson, CRMS of Essential Mortgage, Government Affairs Committee Chair of NAMB. "Thanks to the donations of mortgage brokers who understand that we are the only organization dedicated to the mortgage broker, we have been able to come out with a strong fight and a well laid plan of attack. We still need support to make sure that we can continue this fight and not interupt the access to credit for consumers. We ask mortgage brokers and their employees to make any donations at the NAMBDonations.org Web site."
NAMB will detail this lawsuit and much more with attendees of next week's 2011 NAMB Legislative & Regulatory Conference in Washington, D.C.