NAIHP withdraws LO compensation lawsuit to pursue other options
Board members for the National Association of Independent Housing Professionals voted to withdraw its lawsuit against the Federal Reserve over a rule governing mortgage loan officer compensation. But the trade group said it is working on other options to revoke the rule. The Fed rule, required under the Dodd-Frank Act, went into effect April 6 after a brief stay for judges at the U.S. Court of Appeals for the District of Columbia to hear lawsuits brought by NAIHP and the National Association of Mortgage Brokers to end the rule. The original lawsuits were filed in the U.S. District Court for the District of Columbia. The Fed effectively ended the practice of paying originators more when a borrower accepts a higher interest rate mortgage, known as the yield spread premium. The rule was written to prevent borrowers from being steered into higher-cost mortgage products than the lender requires. The rule also ends of the practice of mortgage originators receiving payments directly from the borrower and the lender simultaneously. The NAIHP and NAMB argued the Fed stepped beyond its regulatory authority to write such a rule and claimed it would only raise costs for borrowers. "In our opinion, continuing with the appeal would be unwise; as it is unlikely a third ruling by the court would be different from the first two. Any further appeal would be heard by the same three judges who recently lifted the 'stay,'" said NAIHP President Marc Savitt. "Our legal team prepared an outstanding case with overwhelming evidence, which was ignored by the court." NAMB did not immediately have a comment, but it did say recently that it was planning another appeal. Savitt said NAIHP still has the ability to reinstate the suit at any time. The trade group added that is "well advanced into alternative options for revoking, what has already proven to be one of the most anti-consumer, anti-small business rules the board has ever promulgated." Write to Jon Prior. Follow him on Twitter @JonAPrior.