The Community Home Lenders of America (CHLA) is using the Trump administration’s mortgage-credit review to reopen one of the industry’s longest-running regulatory fights: whether lenders should be allowed to reduce an individual originator’s compensation to save a loan.
CHLA asked the Consumer Financial Protection Bureau on Monday to limit the federal loan originator compensation rule to payments between separate companies—not what a lender pays its own employees.
For originators, that could mean greater freedom to match a competitor or make a small-balance mortgage work, but potentially by accepting less compensation on the transaction.
The request was one of four recommendations in an Aug. 10 comment letter responding to the CFPB’s review of TRID timing, tolerance rules, and mortgage rescission requirements. CHLA framed the package as implementation of Executive Order 14393, the mortgage-credit order President Donald Trump signed March 13.
Who Pays To Save The Loan?
The current Regulation Z rule generally prohibits compensation based on a loan’s interest rate, annual percentage rate, collateral type, or another transaction term — or a factor acting as a proxy for one.
The rule applies to payments between companies and compensation paid by a lender or brokerage to its originators. It was designed to reduce financial incentives to steer borrowers into less favorable loans.
CHLA wants to preserve the restrictions between companies while removing them from compensation paid to a firm’s own employees. The group argues that the current structure discourages small-dollar mortgages, low-down-payment state bond loans, certain broker-channel products, and competitive pricing concessions.
CHLA advanced the proposal in a 2025 white paper. NMP examined the debate last year, when broker advocates supported targeted reforms but warned that eliminating restrictions wholesale could revive steering risks.
The immediate issue for originators is who absorbs the cost when a loan’s economics do not work. CHLA’s proposal could allow an employer to use individual compensation to help cover a pricing concession or make a marginal loan viable.
An originator might save a transaction that otherwise would be lost — but earn less for closing it.
No change has been proposed or adopted. The CFPB proceeding is a request for information, and any revision would require further agency action.
Smaller IMBs Seek An Examination Exemption
CHLA also wants the CFPB to establish a loan-volume or loan-amount threshold below which smaller nonbank mortgage lenders and servicers would generally be exempt from bureau supervision and enforcement.
The group argues that would more fully implement Section 1024 of the Dodd-Frank Act, which directs the CFPB to consider size, transaction volume, consumer risk, and state oversight when supervising nonbanks.
CHLA did not recommend a specific threshold. It said the CFPB could still intervene following substantiated complaints alleging consumer harm, adverse state examination findings, deficient state oversight, or evidence of material federal consumer-law violations.
The filing cited an unnamed lender with about $1 billion in annual volume that allegedly underwent a six-month CFPB examination costing hundreds of thousands of dollars. CHLA did not identify the company or independently document the example.
Reworking TRID Protections
CHLA proposed a standard form borrowers could use to waive certain TRID waiting periods during a bona fide personal financial emergency.
Borrowers already have that right, but current Regulation Z requires a dated, borrower-specific statement and expressly prohibits printed waiver forms.
CHLA’s proposed checklist covers emergencies including imminent foreclosure, natural disasters, urgent medical expenses, utility disconnection, unsafe property conditions, and impending tax or government action. It excludes convenience, travel, rate concerns, seller pressure, and general urgency.
The group also wants transfer taxes and other government-imposed charges placed within TRID’s 10% cumulative tolerance category. Recording fees are already generally included in that category, while transfer taxes and certain other charges are subject to zero tolerance.
A more consequential proposal would move third-party services selected from a lender’s written list from the 10% tolerance category to the no-limit category.
CHLA argues that lenders cannot control those providers’ charges and that current rules discourage them from offering vetted provider lists. The change would reduce lenders’ exposure to tolerance cures, but could leave borrowers responsible for larger-than-expected fee increases, provided the original estimate was made in good faith.
Stretching Down Payment Assistance
CHLA also wants to change how governmental and nonprofit homeownership assistance is treated under Qualified Mortgage points-and-fees rules.
The group wants to remove the 2% limit on bona fide discount points when eligible assistance pays the points through a non-interest-bearing, deferred-payment subordinate lien. It also wants qualifying third-party closing costs paid through that loan—and financed lump-sum mortgage insurance premiums not retained by the lender—excluded from portions of the calculation.
CHLA argues that current rules can push assistance providers toward reducing principal when a permanent rate buydown might lower the borrower’s payment more.
In its example, a borrower otherwise financing $350,000 at 6.875% receives $20,000 in assistance. Applying it to principal reduces the loan to $330,000 and lowers the monthly principal-and-interest payment by $131.39.
Using the money to buy the rate down to 5.75% reduces the payment by $256.75 and lowers the income needed to qualify by $8,558.20, according to CHLA. Actual results would depend on loan pricing and program terms.
A Bigger Test Than TRID
Executive Order 14393 could affect disclosures, appraisals, digital closings, QM standards, and other rules shaping the cost of originating a mortgage.
But the CFPB’s current information request focuses primarily on TRID, rescission, and reverse mortgage disclosures. CHLA responded with a broader agenda reaching employee compensation, QM treatment, and federal examinations of nonbanks.
Its filing acknowledges that the QM recommendations were not expressly contemplated by the RFI. LO Comp was not among the subjects the CFPB specifically asked about.
That makes LO Comp the clearest test of how far the bureau is willing to take the executive order. For originators, the proposed trade is straightforward: more ability to save the deal, with less certainty about what the deal will pay.
