New loan officer compensation rules delayed

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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-i...