Loan Originator Compensation

The Consumer Financial Protection Bureau on Jan. 18, 2013, issued its final loan originator compensation rule. The rule, among other things, prohibits compensation that varies with loan terms, and bans originators from being paid more if, for example, the consumer agrees to buy title insurance from the lender’s affiliate.

Under the rule, originators cannot be paid by both the consumer and the creditor, and they must meet new qualification and screening standards -- including character and financial responsibility reviews, criminal background checks and training requirements. The final rule also implements Dodd-Frank Act provisions that, for mortgage and home equity loans, generally prohibit mandatory arbitration of disputes related to mortgage loans and the practice of increasing loan amounts to cover credit insurance premiums.

ABA's Position

ABA had urged the CFPB to drop a provision in its proposed rule that would have required lenders to offer a loan option with no discount points or origination fees any time they offered a mortgage with such payment features. ABA said this “zero-zero alternative” would not be a viable option for most banks for various structural and market reasons. The CFPB opted not to include this alternative in its final rule. 0

 

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​For more information please contact Rod Alba.