With the changes in the MLO Compensation Regulations, is it time to look for a new home? Maybe we can help.
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April 5, 2011:
The Appellate Court has lifted the stay issued Friday, April 1, 2011 regarding the Federal Reserve Board Rule on loan officer compensation. Previously slated to start on April 1, the stay has now been lifted and goes into effect immediately. It appears that most lenders will accept loans submitted tomorrow, April 6, under the old rule as long as the application is dated April 5, 2011.
Both NAMB and NAIHP have vowed to continue the fight for the sake of the consumer, we will continue to update as things move forward. So for now, the Loan Originator Compensation Rules are now in effect.
Broker2Banker – experts in assisting Mortgage Brokers and Loan Originators become affiliated with Mortgage Banking companies. Please contact us immediately. We can help.
The U.S. Court of Appeals in Washington, D.C. has granted a temporary stay of the implementation of the Federal Reserve Board’s Loan Originator Compensation rules. The court has directed the defendant Federal Reserve Board to file a reply brief by Monday April 4th. The plaintiffs, the National Association of Mortgage Brokers (NAMB) and the National Association of Independent Housing Professionals (NAIHP), have until Tuesday morning April 5th to file their reply briefs. After that filing takes place the Appeals court can order a hearing or make a decision on the basis of the filed briefs. The stay the court has ordered is a temporary measure freezing things in place while the appeal is considered. If the court decides in favor of the NAMB and NAIHP then the most likely course of action would be that the case would move back to the District Court. The stay would probably be extended to cover the period of time the case is in the District Court and could be extended further if there is another appeal. If the Appeals Court decided in favor of the Federal Reserve the stay will be dissolved upon the issuance of the decision. Pasted below is the notice from the Appeals Court.
Case Number: 11-507
Document: 1301118
In an ongoing attempt to keep mortgage professionals up to date Broker2Banker will continue to post information on this highly volatile subject. Broker2Banker is a mortgage banking fulfillment Services Company with an emphasis on Branch Affiliated Mortgage Banking Companies. Let us help you find a mortgage banking home. To reach us go to the contact section of this site.
by Amy Avitable, director of compliance services, Sheshunoff Consulting and Solutions
As published in Scotsman Guide’s Residential Edition, November 2010.
The landscape for mortgage-broker compensation is changing. Are you ready? Here’s a look at what’s coming and how brokers — and their lenders — can evolve their payment models and prepare for the future.
* * *
The Federal Reserve Board’s final rule on loan-originator compensation takes effect April 1. That date marks the end of an era in how mortgage brokers, mortgage-company employees and even loan officers within banks are paid.
The final rule, announced this past Aug. 16, prohibits paying mortgage brokers and other loan originators based on the interest rate paid by borrowers or on any other term or condition of the loan other than the amount of credit extended. As a result, the rule prohibits yield-spread premium (YSP) that is based on the interest rate and interest-rate overages paid to loan originators. For many brokers and other loan originators, YSP has become a common means of getting paid.
Because the new rule applies to loan originators — defined as people who arrange consumer credit for compensation — it will cover mortgage brokers, certain employees of mortgage companies and financial institutions, and lenders themselves if they are extending a loan that is funded by another creditor.
The rule, however, only applies to closed-end consumer credit secured by a dwelling. Consequently, commercial loans aren’t covered even if they’re secured by someone’s home.
Home-equity lines of credit and consumer loans not secured by a dwelling also aren’t covered by the rule, although the Federal Reserve plans to consider whether they should be as it issues more regulatory requirements in the future. Continue reading Broker compensation will soon take on a new look
The Federal Reserve Board on Monday announced final rules to protect mortgage borrowers from unfair, abusive, or deceptive lending practices that can arise from loan originator compensation practices. The new rules apply to mortgage brokers and the companies that employ them, as well as mortgage loan officers employed by depository institutions and other lenders.
Today, lenders commonly pay loan originators more compensation if the borrower accepts an interest rate higher than the rate required by the lender (commonly referred to as a “yield spread premium”). Under the final rule, however, a loan originator may not receive compensation that is based on the interest rate or other loan terms. This will prevent loan originators from increasing their own compensation by raising the consumers’ loan costs, such as by increasing the interest rate or points. Loan originators can continue to receive compensation that is based on a percentage of the loan amount, which is a common practice.
The final rule also prohibits a loan originator that receives compensation directly from the consumer from also receiving compensation from the lender or another party. In consumer testing, the Board found that consumers generally are not aware of the payments lenders make to loan originators and how those payments can affect the consumer’s total loan cost. The new rule seeks to ensure that consumers who agree to pay the originator directly do not also pay the originator indirectly through a higher interest rate, thereby paying more in total compensation than they realize.
Additionally, the final rule prohibits loan originators from directing or “steering” a consumer to accept a mortgage loan that is not in the consumer’s interest in order to increase the originator’s compensation. The rule will preserve consumer choice by ensuring that consumers can choose from loan options that include the loan with the lowest rate and the loan with the least amount of points and origination fees, rather than the loans that maximize the originator’s compensation.
The Federal Register notice containing the final rules is attached. The final rules are effective April 1, 2011.
Bureau of Financial Protection created:
Loan Originators lose Yield Spread Premium: Brokers better off working with a Bank Affiliate Company if they want to stay in the business.
Mortgage Originator Requirements and Prohibitions as outlined in the new law:
The Law creates a new definition of “mortgage originator”:
Under the Law, a mortgage originator includes persons taking applications, assisting consumers in obtaining a mortgage, or negotiating the terms of a mortgage, but does not include administrative employees, certain employees of manufactured home retailers, real estate brokers unless they are compensated by a lender, broker or other mortgage originator, and servicers or their employees, including those involved in loan modification/loss mitigation. A person “assists a consumer in obtaining or applying to obtain a residential mortgage loan” by, among other things, advising on residential mortgage loan terms, preparing residential mortgage loan packages, or collecting information on behalf of the consumer with regard to a residential mortgage loan. Continue reading Consumer Finance Law Passes
House Passes Resolution to Dictate Mortgage Loan Officer Pay, ComplianceA House Resolution (HR), passed on Capitol Hill, added a series of provisions to the Senate’s Wall Street Reform and Consumer Protection Act, including guidelines that dictate origination fees policy and holds individual loan officers accountable for compliance with the new law. The legislation is also creating concern in the industry about potential negative, unintended consequences its passage may bring.
According to a release from the House Financial Services Committee, HR 4173 dictates that mortgage compensation can only be financed if all originator compensation is paid by the borrower and not third parties.
The borrower also has to pay the entire fee by financing it. The resolution also permits “compensation through rate” for all mortgages as long as they meet the borrower fee financing provision. Previously, the House version of the legislation only allowed this for so-called “qualified mortgages,” those loans that conform to guidelines for purchase by federal agencies and the government-sponsored enterprises (GSEs), while the Senate version applied to all mortgages.
The passage of HR 4173 comes as the House and Senate continue the reconciliation process of each body’s financial reform legislation before it is sent to President Obama for signature. The compensation rules brings both versions in-line with each other, ensuring it will be included in the final version of the legislation.
Another component of the resolution makes mortgage originators, including individual mortgage brokers and loan officers, subject to damages for violations of the legislation. If the broker or loan officer violates the compensation restrictions, isn’t properly registered, or violates regulations prohibiting conflicts of interest (so-called “anti-steering” guidelines), individuals can be fined up to three times their originator compensation.
These new rules, if signed into law, would open the door for originators to expend capital and time re-training employees, as loan officers continue to navigate new policies implemented by changes to the Real Estate Settlement Procedures Act (RESPA). The resolution’s passage comes as the House passes separate legislation to reform the Federal Housing Administration (FHA).
STATE OF CALIFORNIA
DEPARTMENT OF CORPORATIONS
May 4, 2010
FROM: California Department of Corporations
SACRAMENTO 95814-4052 SAN FRANCISCO 94102-5303 LOS ANGELES 90013-2344 SAN DIEGO 92101-3697 1515 K STREET, SUITE 200 71 STEVENSON STREET, SUITE 2100 320 WEST 4
Currently be licensed or have held in the past an active California Real Estate License;
Do not have an MLO endorsement application pending with DRE;
File an MLO license application (Form MU4) to DOC through NMLS no later than June 15, 2010;
Submit a Request for Certification of Pre-License Education no later than June 15, 2010. The request is available on the NMLS website at http://mortgage.nationwidelicensingsystem.org/slr/PublishedStateDocuments/CA-DOC-MLO-New-Application-Checklist.pdf;
Pay a system processing fee of $15.00 to NMLS on or before November 30, 2010.
Mortgage loan originators who fail to file an MLO license application with the DOC or fail to submit the Request for Certification of Pre-License Education by June 15, 2010 will not have their pre-license education certified by DOC.
Upon receipt of the Request for Certification of Pre-License Education and verification of the license with DRE, DOC will submit a list of the real estate licensees who meet the pre-license education certification requirements to NMLS on a continuing basis. NMLS will then send the MLO applicant an e-mail requesting that they log into the system and pay a system processing fee of $15.00. Shortly after payment of the system processing fee to NMLS, the applicant’s record will be updated to reflect compliance with the pre-license education requirements.
The pre-license education certification will not be made until the certification processing fee of $15.00 is paid to NMLS. Please note that the MLO license will not be issued unless the pre-license education requirements are completed or certified in NMLS. Also, MLOs employed by DOC licensees must be licensed by July 31, 2010. If the certification processing fee is not paid on or before November 30, 2010, the state education courses will not be certified and the NMLS record will not be updated. In that case, the applicant will need to complete 20 hours of NMLS approved education in order to satisfy the SAFE requirements. Mortgage loan originators who have their pre-license education certified by DOC will be required to complete 8 hours of continuing education in order to renew their MLO license during the November 1, 2010 to December 31, 2010 renewal period.
TH STREET, SUITE 750 1350 FRONT STREET, ROOM 2034 (916) 445-7205 (415) 972-8559 (415) 972-8559 (213) 576-7500 (213) 576-7500 (619) 525-4233 (619) 525-4233
1-866-ASK-CORP 1-866-ASK-CORP www.corp.ca.gov 1-866-275-2677 1-866-275-2677
If you have any questions, please contact the Consumer Services Representatives at 1-866-ASK-CORP 1-866-ASK-CORP .
April 5th, 2010
The Federal Housing Administration (FHA) announced it will issue a final rule in the next few days to reduce and manage counterparty risks to its insurance funds as it continues to play a critical role in today’s housing market. The new regulations will increase net worth requirements of FHA-approved lenders (including reverse mortgage lenders), strengthen lender approval criteria, and make lenders liable for the oversight of mortgage brokers.
“These changes support quality mortgage lenders while excluding organizations that are ill-equipped to handle the risk associated with market variations,” said FHA Commissioner David H. Stevens. “That is particularly important now when a robust, competitive mortgage finance market is a crucial element in rebuilding the American economy. Lenders bear the overall risk of FHA-endorsed loans, therefore it makes sense for them to approve their counterparties and have sufficient capital to operate.” Continue reading FHA Raises Net Worth Requirements to $2.5 million Over Next 3 Years
A number of Senate Democrats, led by Sen. Jeff Merkley (D-OR), sent a letter to the Federal Reserve Board calling for a ban on YSP, labeling it as an unfair and deceptive practice used to steer consumers into riskier mortgage loans and gain a larger profit.
The letter was clearly used to protect Wall Street and big banks, so that they can increase their market share at the expense of small business men and women and their employees, thus deflecting their involvement in the mortgage and housing crisis. Click HERE to read the Senate Letter signed by the following Senators.
Sen. Christopher Dodd (D-CT) Sen. Robert Menendez (D-NJ)
Sen. Carl Levin (D-MI) Sen. Mark Warner (D-VA)
Sen. Barbara Mikulski (D-MD) Sen. Ron Wyden (D-OR)
Sen. Jack Reed (D-RI) Sen. Daniel Akaka (D-HI)
Sen. Claire McCaskill (D-MO) Sen. Russ Feingold (D-WI)
Sen. Benjamin Cardin (D-MD) Sen. Frank Lautenberg (D-NJ)
Sen. Charles Schumer (D-NY) Sen. Sherrod Brown (D-OH)
Sen. Bob Casey (D-PA) Sen. Jeanne Shaheen (D-NH)
Sen. Sheldon Whitehouse (D-RI)
The Senate and House of Representatives are going to continue to attack the YSP and eventually eliminate it completely. If and when this happens Brokers will have very few options. If you want to continue in the Mortgage Business and are a small business owner, be prepared to change. Start looking at all your options, Affilated Mortgage Bank Branch, Loan Officer for Bank of America, Chase, CitiBank or some other Bank.
| HUD Repeals FHA Origination Fee Cap; Announces New FHA-Related Fee Disclosures. On December 30, HUD issued Mortgagee Letter 2009-53 that eliminates the 1% loan origination fee limit on FHA loans but provides that the FHA will monitor lenders to ensure they are charging “fair and reasonable” fees for all origination services and that it intends to issue future guidance containing fee limits. The letter also clarifies the manner in which fees and charges for Federal Housing Administration (FHA) insured loans must be disclosed on the new Good Faith Estimate (GFE) and HUD-1 Settlement Statement. In particular, the mortgagee letter instructs mortgagees on the proper method for disclosing origination charges (which are no longer capped at one percent of the mortgage amount for standard mortgages) and seller credits. Additionally, with respect to GFEs, the letter provides that mortgagees must file any GFE provided to the borrower on the right hand side of the insurance endorsement case binder. The new requirements go into January 1, 2010. For a copy of the letter, please see http://www.hud.gov/offices/adm/hudclips/letters/mortgagee/files/09-53ml.pdf. |
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