NAMB applauds House committee probe on mortgage broker pay
The U.S. House Financial Services Committee will investigate a new rule designed to change the compensation model for loan originators before it takes effect on April 1. The National Association of Mortgage Brokers applauded the House Financial Services Committee for deciding to examine how the changes will impact loan originators and the small business community within the origination segment. The compensation changes, which were drafted by the Federal Reserve Board last year, prevent mortgage brokers and loan officers who work for lenders or depository institutions from basing their pay levels on interest rates and other variable terms of the mortgage. When announcing the rule last year, the Federal Reserve said it would implement the rule to "prevent loan originators from increasing their own compensation by raising consumer loan costs, such as by increasing the interest rate or points." Once the rule goes live in April, mortgage brokers and loan officers at depository institutions will be limited to a compensation model that pays originators on a percentage of the loan amount. The House Financial Services Committee is examining the change because it's "concerned that the rules may have an adverse impact on the ability of small businesses that originate mortgages to remain in business," according to a release published by NAMB on Wednesday. Compensation requirements on the origination side of the market have been drumming up controversy for the past several months. The Mortgage Bankers Association filed suit against the Department of Labor in January, claiming the agency reversed its own opinion by deciding to classify mortgage loan officers as "not-exempt" from overtime pay provisions. The MBA is fighting the decision in court, saying this new rule could have a devastating effect on pay and administrative procedures. “This abrupt reversal by the department not only opens lenders up to lawsuits for past actions, but also could require them to make costly changes to their internal operations and compensation structure, costs that will ultimately be borne by the consumer," the MBA said in January. Write to Kerri Panchuk.