This is the first in a series of blog posts on the Consumer Financial Protection Bureau (CFPB). It first appeared in National Mortgage News on July 2, 2013 under the title "CFPB Gets it Right… at Least 95% of it."
In the circles in which I travel, discussions related to the Consumer Financial Protection Bureau (CFPB) have not been favorable. Whether the complaint is inexperienced auditors, (and by inexperienced I mean individuals with little training --3 weeks to be exact) with a complete lack of understanding of mortgage lending and the broader, secondary market. Then there are the mindboggling and sometimes laughable “questions” or “concerns” raised by said inexperienced auditors. Then there’s the heated debates regarding flat-fee compensation and the CFPB’s perceived desire to push the mortgage broker out of the business. I certainly can’t dismiss the conspiracy theorists who argue that this was all contrived in an effort to move the industry to the large money center banks. While the verdict is still out, and there’s a long way to go with the more recent release of final rules, I believe that the CFPB got it right… at least 95% right!
Let’s look at the 95%...
Loan Originator Compensation and the Points and Fees Calculation • The Dodd-Frank Act included provisions that limited loan originator (LO) compensation by including LO compensation in the 3% points and fees cap on Qualified Mortgages (QM). One could argue that this would have the effect of counting fees paid to mortgage brokers against the 3% twice. Under the final rule released by the CFBP, the compensation paid to a LO employee by a mortgage broker or mortgage lender is not included in the 3% threshold. Bravo CFPB. This should squelch the chatter from my broker and conspiracy theorist friends. Keep in mind, compensation paid by a mortgage lender to a mortgage broker (wholesale transaction) still must be included in points and fees.