How the loan officer wage, overtime cases will affect California

by MPA07 Dec 2014
The U.S. Supreme Court heard oral arguments last week in cases that could have a significant impact on the mortgage industry and all federal agencies.  However, how does the case affect agencies in California?

Perez v. Mortgage Bankers Association and Nickols v. Mortgage Bankers Association (MBA) follow a 2010 decision by the U.S. Labor Department (DOL) to begin applying overtime and minimum wage rules to loan officers.

That 2010 ruling reversed a 2004 finding, which prompted the MBA to file its case.  MBA argued that the DOL’s withdrawal was invalid because it failed to follow the Administrative Procedure Act’s (APA) notice and comment procedures. In July 2013, the Court of Appeals for the District of Columbia Circuit vacated the 2010 decision.

Now, the Supreme Court will decide whether a federal agency is required to put out a formal notice and take public comment before changing its interpretation of regulations.

The state of California defines “regulation” broadly to include “every rule, regulation, order, or standard of general application or the amendment, supplement, or revision of any rule, regulation, order or standard adopted by any state agency to implement, interpret, or make specific the law enforced or administered by it, or to govern its procedure," according to Cal. Gov. Code § 11342.600.

However, the California Supreme Court has decided interpretations of rules arising from court cases are not regulations.  Although, they may be “persuasive as precedents in similar proceedings and that agencies may provide private persons with advice letters without complying with the APA,” according to Keith Paul Bishop of California Corporate & Securities Law.

The murky question of when an interpretation becomes a regulation in California has not been decided.

MBA claimed that the 2010 ruling subjects mortgage lenders to unnecessary litigation. “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,” John Courson, who was president and CEO of MBA between 2009 and 2011, said.

Courson added that requiring loan officers to be paid overtime would not increase their compensation and asking them to now track and report their hours will deprive them of their flexible schedules.


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