On Oct. 17, the Mortgage Bankers Association (MBA) filed a comment letter with the Consumer Financial Protection Bureau (CFPB) expressing reservations and suggestions concerning a proposed rule on loan officer (LO) compensation and qualification requirements.
The CFPB's proposal stems from new requirements enacted as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act.
MBA noted that roughly 18 months ago, the Federal Reserve Board issued loan officer compensation rules that sought to implement similar--yet in some areas different--provisions of the Dodd-Frank requirements. The Fed's rules mandated a complete overhaul of compensation practices for mortgage originators. But MBA's letter states that "the implementation process was problematic, guidance was provided that seemed to extend far beyond the rules, and compliance was demanded in too short a period."
Also, in the interim period, new licensing and registration procedures for loan officers went into effect pursuant to the Secure and Fair Enforcement in Mortgage Licensing Act (SAFE Act).
MBA states in its comment letter to the CFPB on its proposed rule that "[N]ow that all this has been done, we think it is time to take stock of the [Fed's] rules and make changes where needed. It is also time to examine the consequences of the SAFE Act and establish more uniform qualifications for loan originators."
Some of MBA's letter addresses the Dodd-Frank Act restriction on points and fees and commission-based payments. The letter states: "MBA strongly believes an exemption is necessary from the provision of Dodd-Frank that can be read to prohibit the payment of transaction-specific commission to a loan originator by a creditor or a mortgage brokerage if the creditor or brokerage also receives points and fees from the borrower."
The letter states that MBA believes it is imperative that the exemption becomes effective prior to Jan. 21, 2013, to avoid the possibility that the law's provision will go into effect by operation of Dodd-Frank. MBA says that there is "ample legal basis for a finding supporting exemption under both Dodd-Frank and the Truth in Lending Act."
As for the CFPB's proposal that would require lenders to offer a "zero-zero" option or a no-points-and-no-fees loan, MBA raised additional concerns. The comment letter states: "While MBA supports an exemption from the provision of Dodd-Frank that can be read to restrict the payment of a transaction-specific commission...