As most brokers and wholesalers have been scrambling to adjust their business models to comply with the April 1st enforcement of the Federal Reserve Board’s loan originator compensation rule, they woke up today to find it was business as usual. With some last minute heroics by the National Association of Mortgage Brokers (NAMB) and the National Association of Independent Housing Professionals (NAIHP), the industry was granted a stay implementation of Regulation Z; Docket No. R-1366, Truth-in-Lending in the United States Court of Appeals for the District of Columbia. Instead of a new beginning for mortgage brokers and wholesalers in their pricing structures, it was back to the way business has been conducted all along rather than the adoption of a brand new pricing structure, at least until the appeal date of April 5, 2011.
Scores of wholesalers, including Fifth Third Mortgage, Flagstar, Freedom Mortgage, Nations Direct Mortgage LLC, Pinnacle Capital Mortgage, Plaza Home Mortgage Inc. and Real Estate Mortgage Network (REMN) among others issued notices to their brokers letting them know that business was being conducted as usual in light of the stay.
“Once again, we are in a holding pattern,” said Joe Amoroso, director of national sales for REMN. “The best we can do as a lender is to stay on top of the issue, and make decisions that are in the best interest of our company and of our broker partners. Hopefully, the net result will be good for all of us, including the consumer. It’s just a shame that we need to go through this drama.”
When enacted, many feared the LO compensation rule would cause a massive consolidation in the mortgage industry, with the residual effect of driving small lenders out of business and limiting the options for homebuyers nationwide.
NAMB, NAIHP and other mortgage industry trade association, have been lobbying against the rule through visits to Capitol Hill and legal actions against the Federal Reserve Board. On March 29th, a hearing was held in U.S. District Court for the District of Columbia before Judge Beryl Howell, where NAMB, NAIHP and attorneys for both trade associations presented proof as to why the Court should grant a temporary restraining order (TRO) against the FRB’s LO compensation rule. NAMB’s initial suit, filed March 9, 2011, argued that the LO compensation rule would "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."
“I am pleased to see trade associations like NAMB fighting so hard for the broker community validating their value to all of us who support the wholesale market and the consumer benefits by working with quality brokers,” said Lisa Schreiber, executive vice president of wholesale lending for TMS Funding.