Fed Compensation Rule Levels Playing Field for Fixed Rate Reverse Mortgages

With the April 1 implementation date for the Federal Reserve’s loan officer compensation rule just four days away, several lenders have confirmed that new compensation plans will change the way lenders offer fixed-rate reverse mortgages as the industry knows it.

In general, most wholesalers have settled on a lender-paid compensation model for fixed-rate reverse mortgage loan originators. Under its new plan, MetLife says it will only accept lender-paid submissions, with pricing options where the consumer pays an origination fee to MetLife for fixed-rate, closed-end loans.

“The purpose is to have a broker be agnostic to the pricing choice and not have a decision of pricing option based upon broker compensation,” said Bob Sivori, MetLife Bank vice president, reverse mortgage, who is also responsible for third party channels. Due to recent Fed guidance presented on a conference call, said Sivori, MetLife decided to focus on the lender-paid compensation model (for fixed-rate reverse mortgage loans), pending additional guidance.

Currently, MetLife is rolling out two coupons with plans to offer more. “The brokers will be compensated identically for each of the options,” he explained. “The borrower will choose the pricing option that makes the most sense.”

Exactly how brokers will fare under the new model is unclear, but Sivori said it will cause brokers to compete on qualities other than price.

“Essentially, it’s a level playing field,” said Sivori, of the effect on brokers.

Ultimately, the implementation of the rule should benefit the borrower. “I don’t think it’s going to be bad for the industry…or for the consumer.”

Written by Elizabeth Ecker

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