A bi-partisan letter co-authored by United States Sens. David Vitter (R-LA) and Jon Tester (D-MT) has been submitted to Ben S. Bernanke, Chairman of the Board of Governors of the Federal Reserve Board, requesting a delay in the implementation of the Fed’s rules on loan originator (LO) compensation, set to take effect April 1, 2011. The LO compensation rule, Regulation Z; Docket No. R-1366, Truth-in-Lending, prohibits mortgage brokers from paying their LOs commissions from fees paid by the consumer, which could inflict harm to small business mortgage brokers, their loan officers and their entire staff if enacted.
“This bi-partisan letter is due to the efforts of the National Association of Mortgage Brokers and the Community Mortgage Banking Project, and was issued to delay the Fed’s rule on LO compensation,” said Mike Anderson, CRMS of Essential Mortgage, Government Affairs Committee Chair of NAMB.
Mortgage industry trade groups, such as NAMB and the Mortgage Bankers Association (MBA), and government agencies such as the U.S. Small Business Administration Office of Advocacy (SBA Advocacy) have submitted written requests to the Federal Reserve about the unintended consequences the LO compensation rule may have against small businesses and its potential to limit access to mortgages for consumers.
“We remain concerned the Federal Reserve has not fully evaluated the impact of this rule on the housing market," said the joint letter signed by Sens. Vetter and Tester. “We urge you to delay the implementation of the loan originator compensation rule so that these provisions can be better coordinated with forthcoming TILA regulations and the impacts of loan concentration can be more thoroughly studied.”