Death knell for brokers if Points and Fees Cap doesn't change

by Adam Smith01 Nov 2013

The currently written rules around broker compensation will drive brokers out of business, an industry association has told the CFPB.

The National Association of Mortgage Professionals has appealed to the CFPB via a letter sent to assistant director Dan Smith. In the letter, NAMB President Donald Frommeyer and Government Affairs Chairman Richard Bettencourt have suggested that current Qualified Mortgage (QM) and Ability to Repay (ATR) rules could see brokers driven out of business.

"As currently written, the QM/ATR rule's unintended consequences will force a majority of the brokers to go out of business, become a creditor, or join a larger non-depository lender," the letter said.

The NAMB in particular took issue with the Creditor to Broker Compensation rule under the cap.

"consumer credits are generated when creditor compensation, less broker compensation, yields a credit which is then credited back to the consumer in the form of a lender credit. These credits are real money that consumers utilize in mitigating the upfront costs associated with a real estate transaction."

The NAMB told Smith that "numerous conversations" with members indicated they provided a consumer credit "98% of the time". The group pointed out disparity between brokers and lenders, saying that brokers were required to provide mandatory credits to the consumer, while depositories and non-depository lenders had no such requirement.

The NAMB proposed to the CFPB either the elimination of Creditor to Broker Compensation from the 3% points and fees cap, or raising the cap to 5%.

"A total elimination of creditor to broker compensation or an increase to 5% in the Points and Fees Cap provision will ensure that all mortgage brokers, especially those serving low- to moderate-income homeowners as well as those operating in geographic locations with low to moderate loan amounts, will have the opportunity to assist in the ongoing housing recovery."

The NAMB closed by requesting a face-to-face meeting with the CFPB to discuss how many mortgage brokers planned to convert to lenders or work directly inside a lender company.


  • by Bruce | 11/1/2013 7:41:51 AM

    I doubt the CFPB or other government agencies would consider the above recommendations - it makes too much sense. I believe the goal of the CFPB is to eliminate as many brokers as possible through onerous regulations.

  • by JR | 11/1/2013 8:30:41 AM

    Bruce - Don't think you could have said it any better. Our industry continues to get bogged down with more and more regulation, but somehow we and the wholesale lenders always figure out loopholes to maneuver through them.

  • by Bayview Mortgage Inc | 11/1/2013 8:38:52 AM

    If a company can't make it on 3 points. They really don't have a sound business model. And need to be run out of business. I charge one point on all my mortgages and do very well. The Broker that can't make it work, should just unload their mortgage originators and hire processors. I am seeing this done in small Texas shops of 10 LO or less. The applications are done on line and the owner just signs on all mortgage applications. The LO is just a referal source. They are really not needed. If the LO's are any good. They will go out and get their own brokers licenses.


Should CFPB have more supervision over credit agencies?