NOTICE OF RULES COMMENT PERIOD – no later than 11/30/10
Notice is hereby given that the Financial Institutions Division of the Regulation and Licensing Department proposes to amend the following rules: the Mortgage Loan Originator Requirements, 12.19.2 NMAC, pertaining to The New Mexico Mortgage Loan Originator Licensing Act; the Mortgage Loan Company Requirements, 12.19.8 NMAC, pertaining to Mortgage Loan Company Act and the Home Loan Protection Act – General Provisions, 12.15.3 NMAC, pertaining to the Home Loan Protection Act. The draft rules may be viewed at www.newmexicomortgagelending.us. Interested persons shall file their written comments on the proposed rules by no later than 5:00 P.M. November 30, 2010. Comments on the proposed rules shall be sent to:
Jackie Dalmy, Licensing Specialist
Financial Institutions Division
Toney Anaya Building,
2550 Cerrillos Road, 3rd Floor
Santa Fe, New Mexico 87505
Phone # 505-476-4908
Fax # 505-476-4670
Email address: Jackie.firstname.lastname@example.org
First Look at Federal Reserve Final Rule
Prohibiting Certain Loan Orginator Compsenation and Steering
Regulation Z: Docket No. R-1366
August 20, 2010
OVERVIEW – This Final Rule issued by the Federal Reserve on August 16, 2010 amends Regulation Z implementing Truth in Lending Act (TILA) and Home Ownership and Equity Protection Act (HOEPA) to prohibit (1) compensation to loan originator based on the terms or conditions of loan, including rate or prepayment penalty, but excluding amount of credit extended; and (2) steering by mortgage brokers and other “loan originators.”
• COMPLIANCE REQUIRED – For transactions for which creditor receives application on or after April 1, 2011.
• PERSONS COVERED BY RESTRICTIONS – Covers natural persons and business entities including-
o “Loan originator,” for particular transaction, who for compensation or other monetary gain, arranges, negotiates or otherwise obtains an extension of consumer credit for another person. Includes employees of creditor that meet loan originator definition, such as loan officers. Also includes mortgage broker employees and mortgage broker companies that close loans in own names in table-funded transactions. Mortgage brokerages only excluded if, for transaction, they act as creditor that funds loans from own resources including line of credit.
o Creditor for particular transaction, when using table funding and not funding loan out of their own resources, such as deposits or a warehouse line of credit, whether they are depository institution or non-depository mortgage company.
o Not covered – Creditor not using table funding and funding out of their own resources, including deposits or warehouse line of credit; payments to creditors for selling loans to a secondary market investors; loan servicer when servicer modifies existing loan on behalf of current owner of loan; and mortgage brokerage firm acting as creditor and funding loan from own resources, including line of credit.
• COVERED TRANSACTIONS – All closed-end transactions secured by dwelling, or real property that includes dwelling, regardless of lien position, including reverse mortgages, but excluding home equity lines of credit (HELOCs) and timeshare plans.
• PROHIBITIONS –
• Prohibits creditor or any other person from directly or indirectly paying compensation to mortgage broker or other loan originator based on mortgage transaction’s terms or conditions, other than the amount of credit extended. Compensation can be neither increased nor decreased based on the loan’s terms or conditions. Compensation includes amounts retained by originator, not bona fide and reasonable charges of third parties such as title insurance or appraisals.
o Permissible Compensation – May be (1) based on fixed percentage of amount of credit extended subject to a minimum or maximum amount (to encourage small loans); (2) fixed in advance for each loan and account for a loan originator’s fixed overhead costs; (3) based on the percentage of loan applications that result in consummated loans and the quality of the loan originator’s loan files; and (4) based on volume of loans. Compensation may differ for retail and wholesale originators and based on geographical area.
o Prohibition does not prohibit compensation in cash or loan proceeds from the consumer directly to loan originator provided originator does not also receive compensation from any other party for transaction.
o Impermissible – Compensation that is fixed percentage of loan amount that varies with different levels or tiers of amounts.
• Prohibits loan originator from steering consumer to consummate loan that provides loan originator with greater compensation, as compared to other transactions loan originator offered or could have offered to consumer, unless loan is in consumer’s interest.
o Safe Harbor – Establishes safe harbor – not rebuttable presumption – to comply with prohibition against steering. Loan originator deemed to comply if: (1) for each type of transaction in which consumer expresses interest (i.e., fixed rate, adjustable or reverse) consumer is presented with and able to choose from loan options that include (a) loan with lowest interest rate, (b) loan with lowest total dollar amount for origination and points or fees and discount points, and (c) a loan with the lowest rate and no risky features such as negative amortization, prepayment penalty, interest-only payments, balloon payment in the first seven years of loan, a demand feature, shared equity, or shared appreciation; (2) loan options presented to consumer are obtained by loan originator from a significant number of creditors with whom originator regularly does business; and (3) loan originator believes in good faith consumer likely qualifies for the options presented.
o Special rule for creditor employees – Employees of creditor, that are loan originators, are deemed to comply with anti-steering rules when originating loans for their employer-creditor, if they comply with prohibition against receiving compensation based on terms or conditions of a loan. If employee acts as mortgage broker forwarding consumer’s application to creditor other than loan originator’s employer, employee is subject to anti-steering prohibitions.
• RECORDKEEPING – Requires creditors and other persons who compensate loan originators to retain records for at least two years after mortgage transaction is consummated.
For further information, contact: Ken Markison, MBA Regulatory Counsel, (202) 557-2930 or email@example.com
Final Rule on Loan Officer Compensation 8-16-10