Over the past three months the mortgage industry has struggled greatly to interpret and implement loan originator compensation reform and new anti-steering regs.

The final rules are scheduled to go live on April 1 but the Federal Reserve still hasn't provided formal written guidance on the rule changes. This forced major mortgage banks and regional lenders to think up their own policies and procedures. Unfortunately there has been no uniformity in their individual translations. This lack of interpretative consistency has created confusion and further muddled the loan application process for consumers.

As a result, several lawsuits have been filed against the Fed to delay the rule change.  Both the NAIHP and NAMB filed suit to prevent the April 1st implementation of the LO compensation rule. The NAMB suit seeks temporary and preliminary restraints that would enjoin the implementation of a specific section of the Federal Reserve Board's Final Rule on loan originator compensation. Also, a letter co-authored by Senators David Vitter from Louisiana and Jon Tester from Montana was recently sent to the Federal Reserve requesting a delay in the implementation of the Fed's loan originator compensation rules.

Adding to that letter today, 32 Republican members of the House formally stated their opinion on the issue.


March 15, 2011

The Honorable Ben S. Bernanke
Federal Reserve Board
20th & Constitution Ave, NW
Washington,DC 20551

We are writing in reference to the Federal Reserve Board's (the Board's) final rule, Regulation Z: Docket No. R-1366, Truth in Lending, governing loan originator compensation and steering.

In light of the level of interest among affected parties, we respectfully request that the Board extend the implementation date for this rule beyond April, 1, 2011.  There have been complaints among numerous stakeholders that the final regulation is "intentionally vague," that the Board has refused to provide formal guidelines, and the different members of the Board staff have offered differing interpretations of it's meaning.  Given the importance of the rule in protecting consumers as well as in ensuring a fair application to small businesses or companies that may experience significant job loss due to its implementation, we recommend that the Board delay implementation of the final rule and provide proper written guidance to facilitate compliance by affected entities.

As we learned during the previous two years, many aspects of the Board's final rule raise concerns among consumers and the industries that serve them.  Allowing additional time for implementation would help to ensure that the final rule accomplishes the Fed's goals while eliminating potential misunderstanding or confusion for all interested stakeholders.

We appreciate your willingness to take our concerns into consideration.  We share the Board's goal to improve compensation practices and better align incentives in the mortgage transaction, and we believe that additional time to implement the final rule will help us all attain that goal.


Spencer Bachus


MND was one of the first industry voices to publicly request the delayed implementation of these regs:Originator Compensation Reform: Putting the Cart Before the Horse

We have also published a plethora of content on originator compensation policies, including the interpretations of various lenders : READ MORE