The U.S. Federal Reserve on 8/16/10 published a long list of new rules intended to protect consumers from what the central bank describes as “unfair, abusive, or deceptive lending practices.” The documents outline new requirements that will govern compensation to mortgage professionals and disclosures to borrowers regarding their home loans.
“[The new rule] will prevent loan originators from increasing their own compensation by raising the consumers’ loan costs, such as by increasing the interest rate or points,” the Fed said in a statement. “Loan originators can continue to receive compensation that is based on a percentage of the loan amount, which is a common practice.”
The final rule also prohibits a loan originator that receives compensation directly from the consumer from also receiving compensation from the lender or another party. It addition, it makes it illegal for loan originators to direct a consumer to accept a mortgage loan that is not in the consumer’s interest in order to increase the originator’s compensation.
These final rules on mortgage broker and loan officer compensation become effective April 1, 2011.
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