The Consumer Financial Protection Bureau’s decision not to amend loan origination compensation calculation for brokers gives them “one less reason to be a broker,” an industry executive has said.
The CFPB made several amendments to the ability-to-pay rule last week, including one that will allow loan origination compensation to be excluded from the 3% points and fees cap. The new calculation applies to loan origination employees, but not brokers, according to the CFPB.
For loan officers working for a direct lender, this is an advantage, said Bill Bent, executive vice president of production of Academy Mortgage. But for a broker, the rule doesn’t change that he must include his origination compensation in the 3% points and fees calculation, putting him at a disadvantage to those working for direct lenders, he said.
Still, the loan origination compensation calculation amendment is an overall positive to the mortgage industry, Bent said.
Under new regulations and compliance, the broker model has been difficult to uphold, said Andy Sandkamp of Nationstar Mortgage.
Along with the loan origination compensation rule amendment, the CFPB announced Wednesday several others to the ability-to-pay rule. Amendments included an exemption to the ability-to-repay rule for smaller creditors (those under US$ 2bn in assets and 500 yearly loan originations) and an exemption for non-profit lenders, such as some types of credit unions that lend to low-to-medium income borrowers.