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Broker compensation rule captures more heat in federal court

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The Federal Reserve Board is facing more opposition in federal court over new broker and loan officer compensation rules slated to take effect April 1. The Community Mortgage Banking Project and the Community Mortgage Banking Research Fund filed a brief with the United States District Court for the District of Columbia this week, voicing support for two existing lawsuits that seeks to overturn the "loan originator compensation and anti-steering rule" imposed by the Fed. The National Association of Mortgage Brokers and the National Association of Independent Housing Professionals both sued the Federal Reserve Board last week in an effort to stop the rule from taking effect. In the latest amicus brief, the Community Mortgage Banking Project says "the rule, unlike any known regulation of an entire lawful industry, micro-mandates the terms of employment of individual loan originators employed by mortgage bankers." The associations added that, "The final rule prevents mortgage bankers' employees from offering to consumers the full range of competitive loan pricing options." They wrote in their brief, "Incredibly, the final rule not only prohibits loan originators from arranging loan terms that result in higher consumer costs, the same prohibition applies to offering consumers lower cost mortgage loans to meet competition and to save the consumer money." The Fed's new guidelines on broker compensation have been under fire for several months. Regulation Z is of particular concern since it will change the compensation of brokers and loan officers by conditioning pay on the amount of credit extended. However, the parties attacking the Fed in court also contend the Fed Board overreached, violating its own authority under the Home Ownership and Equity Protection Act and the Administrative Procedures Act. Write to Kerri Panchuk.

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