K&L Gates: CFPB rule drops no-point, no-fee requirement for originators
The Consumer Financial Protection Bureau’s final rule on mortgage loan originator compensation drops a controversial proposal that would have forced lenders to offer no-point, no-fee mortgages to customers.
Instead, of that sharper move, attorneys with K&L Gates law firm say the CFPB eased back on certain compensation rules while simultaneously loosening the "technical interpretation prohibiting mortgage broker companies from paying commissions to their loan officers."
Still, the CFPB confirmed other regulations originally laid out by the Federal Reserve by essentially continuing a prohibition on loan-term based and dual-source compensation, K&L Gates said in a client advisory on the CFPB’s final originator compensation rule.
But there are still a few key points originators need to keep in mind – one of the most significant being how to determine who is a loan originator based on the CFPB’s definition.
On this issue, K&L Gates warns the final rule expands upon the types of activities that could allow someone to fit within the definition of a loan originator since the final rule includes functions that may seem administrative at first.
Though the final rule exempts persons who perform ‘purely administrative tasks,’ K&L Gates says "even typing an applicant’s information into an application apparently plays an important enough role in the origination process that it should be subject to the requirements the Dodd-Frank Act establishes with respect to loan originators."
As far as restricting loan officer compensation, K&L Gates says the two anti-steering provisions in the existing rule resurfaced in the CFPB's final outline.
Essentially, the rule prohibits compensation based on a term of a transaction other than the loan amount and prohibits dual-compensation schemes in which the loan originator is paid by a borrower and another person, typically a creditor.
Click here to read K&L Gates full report on the CFPB's final loan originator compensation restrictions.