Jan. 22, 2013 – As NAFCU advocated, the CFPB announced Friday that its final rule on mortgage loan originator compensation will not include the 0-0 alternative mortgage loan requirement.
NAFCU President and CEO Fred Becker said the association is pleased the CFPB has recognized that the 0-0 alternative proposal would not be useful to consumers and lenders. “Unfortunately, although well-intended, this rule will potentially increase the cost of compliance and add to the ever-increasing regulatory burden on credit unions.”
The rule, which implements Dodd-Frank Act requirements, imposes a number of limits regarding mortgage loan originator compensation that would create additional regulatory burden on credit unions. Among other things, the rule:
- prohibits compensation that varies with the loan terms – a broker or loan officer cannot get paid more if the consumer takes a loan with a higher interest rate, a prepayment penalty, or higher fees.
- prohibit loan originators from being paid by both the consumer and another person such as the creditor; and
- replaces the current state-by-state qualification requirements for loan originators with a new federal standard.
The 0-0 alternative mortgage loan requirement, which was included in the proposed rule and would have been problematic for credit unions, will not be part of the final rule.
NAFCU was adamant that the CFPB should not include the requirement in the final rule, noting that it would create unnecessary consumer confusion and made mortgage lending for credit unions more difficult. The association had called for the CFPB to allow credit unions to make 0-0 alternative loans available upon request if and when the consumer qualifies for such loans.
In announcing the final rule, the CFPB noted that, “Based on the comments received, we have decided not to finalize this part of the proposal.”
Becker said NAFCU will "examine the rule thoroughly to assess its full impact on credit unions and their members.”
The majority of the rule is effective on Jan. 10, 2014. However, the prohibitions on mandatory arbitration and the financing of credit insurance premiums are effective June 1, 2013.
The CFPB on Friday also approved a final rule regarding appraisals under Regulation B as well as an interagency final rule regarding higher-priced appraisals. The CFPB has also released a number of other final rules recently.