Mortgage brokers have won what could turn out to be a brief reprieve from new rules governing loan officer compensation that had been scheduled to take effect today, with a federal appeals court agreeing to consider the merits of emergency motions filed Thursday by two industry groups.
The rules — intended to prevent loan originators from steering borrowers into higher-interest-rate loans — were drawn up by the Federal Reserve under its authority to enforce the Truth in Lending Act (TILA).
The new rules stipulate that loan officer compensation cannot be based on a mortgage transaction’s terms. Loan officers employed by mortgage brokers would be prohibited from collecting loan origination fees from consumers if they are also receiving rebates known as yield-spread premiums, paid by lenders.
Critics say yield-spread premiums, which are tied to a mortgage’s interest rate — have served as an incentive for mortgage brokers to steer borrowers into high-interest loans.