Congress Puts Pressure on Fed on Compensation Rules

Senators Jon Tester, D-Mont., and David Vitter, R-La., are urging the Federal Reserve Board to indefinitely delay implementation of its originator compensation rule which goes into effect April 1. In a new letter written to Fed chief Ben Bernanke, the Senate Banking Committee members raise concerns that the agency has not provided written guidance on the rule, which falls under the Truth in Lending Act. They also fear that it will lead to further concentration in the home financing market, which is already “dominated” by the nation’s three largest banks. “To date, the Federal Reserve has declined to provide any written guidance to small lenders and brokers, which would provide clarity and assist them with compliance,” they write in a March 11 letter. “As a result, community based lenders and brokers essentially have been left in limbo, unable to effectively design compliant compensation systems for the future.” The two senators note that the Fed has decided not to promulgate three other TILA rules mandated by the Dodd-Frank bill and passed that responsibility on to the new Consumer Finance Protection Bureau, which will assume regulatory authority over TILA and the Real Estate Settlement Procedures Act on July 21. They are concerned the LO compensation rule and “inconsistent” implementation of other TILA rules could “unnecessarily disrupt” the mortgage market. “For these reasons, we urge you to delay implementation of the loan originator rule so these provisions can be better coordinated with forthcoming TILA regulations and the impacts of loan concentration can be more thoroughly studied,” the senators say.



2 Responses to Congress Puts Pressure on Fed on Compensation Rules

  1. Thank goodness there has been a delay. The changes in compensation will be so stressful! I honestly don’t think there should be any changes because the new compensation rules would mean closing costs can’t be split between borrower and lender. It would either all come out of the borrower’s pocket or all be paid by the lender, whereas now the costs can be split.

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