Premiere Mortgage Services Inc. - Dana Bain

STOP The Fed Rule on Originator Compensation

February 4th, 2011 5:22 PM by Robin Bain

The Fed Rule on

Originator Compensation

NAIHP is aggressively fighting this anti-competitive, anti-small business rule. Our legal team is finalizing our position and preparing to file legal action against the Fed, should the FRB not withdraw the rule.

NAIHP has always believed this rule was dangerous and needed to be stopped. Our position has never changed, since the day it was originally proposed in August of 2009. For over a year, we tried working with the Fed to make changes, but that effort failed.

In recent weeks, NAIHP has held several high level meetings with various agencies, including the CFPB, Elizabeth Warren, the Financial Crisis Inquiry Commission and numerous legislators. Between now and Christmas, we will be meeting with additional agencies, along with two incoming Congressional Committee Chairs.

Our position is clear. The FRB lacks the authority to restrict compensation. Moreover, the testing for this rule was seriously flawed and limited. The rule picks winners and losers, in that it eliminates competition, which increases costs for consumers and creates more business failures for small business.

In addition, with the passage of the Dodd-Frank Wall Street Reform Act, the FRB should have withdrawn their proposed rule, instead of finalizing it. This action by the Fed, showed a complete disregard for Congress and gives support to those who believe the FRB is a secret agency, who acts without oversight.

NAIHP will be updating this page weekly, or as events happen.

SBA Requests Fed to Delay Rule on Originator Compensation

SBA - Office of Advocacy

January 13, 2011


The Honorable Ben S. Bernanke
Board of Governors of the Federal Reserve System
20th Street and Constitution Avenue, NW
Washington, DC 20551

Sandra F. Braunstein
Consumer and Community Affairs Division
Board of Governors of the Federal Reserve System
20th Street and Constitution Avenue, NW
Room 8201
Washington, DC 20551

Dear Chairman Bernanke and Director Braunstein:

I am writing in reference to the Board of Governors for the Federal Reserve (Board) final rule on Regulation Z; Docket No. R-1366, Truth in Lending, which implements regulations for loan originator compensation and steering(1). Advocacy is concerned that the Board may not have published a compliance guide as required by the Small Business Regulatory Enforcement Fairness Act (SBREFA)(2). Advocacy recommends that the Board publish a compliance guide in the immediate future and extend the time for small entities to comply to reflect the delay in the availability of the guide.


Congress established the Office of Advocacy under Pub. L. 94-305 to represent the views of small business before Federal agencies and Congress. Because Advocacy is an independent office within the Small Business Administration (SBA), the views expressed by Advocacy do not necessarily reflect the views of the SBA or of the Administration. Section 612 of the Regulatory Flexibility Act (RFA)(3) requires Advocacy to monitor agency compliance with the Act, as amended by the SBREFA. In 1980, Congress enacted the RFA after determining that uniform federal regulations produced a disproportionate adverse economic hardship on small entities. In order to minimize the burden of regulations on small entities, the RFA mandates that federal agencies consider the potential economic impact of federal regulations on small entities.

In 1996, Congress amended the RFA with SBREFA. Among other things, SBREFA requires agencies to provide plain English compliance guides to clearly explain each final rule that has a significant economic impact on a substantial number of small entities. The intent of section 212 of SBREFA is to ensure that small businesses have a way to understand complex and technical federal regulations.

The Need for a Compliance Guide

The Board’s final rule on loan originator compensation and steering requires major changes to industry practices and procedures by April 1, 2011. Small entities have indicated that the requirements of some of these changes are unclear and confusing. They are concerned that the lack of clarity may lead to problems in compliance.

Advocacy reviewed the Board’s website. Advocacy commends the Board for having a SBREFA compliance guide page on its website. However, although there are compliance guides for Regulations C, D, E, F, H, I, J, L, M, O, P, R, V, X, AA, BB, CC, DD, and GG, Advocacy was unable to find a compliance guide for Regulation Z.(4)

Section 212(a) (3) of SBREFA requires an agency to publish each compliance guide on the same date as the date of publication of the final rule or as soon as possible after that date and not later than the date on which the requirements of the rule become effective. In this particular instance, it is imperative that the agency immediately publish a compliance guide on Regulation Z and make it available on its website. It is extremely difficult and expensive to perform the requirements of this rulemaking without proper guidance from the Board. As stated in the preamble to the final rule, this rulemaking requires small entities to “alter certain business practices, develop new business models, re-train staff, and reprogram operational systems to ensure compliance with the final rule.”(5) Without proper guidance, a small entity could develop new business models, reprogram equipment and re-train staff only to learn that the steps taken do not comply with the new regulations. In such a situation, the small entity would incur additional costs that could be avoided if they have the compliance guide. It would be a waste of valuable resources that could be used to address other needs of the business.

As noted above, the intent of section 212 of SBREFA is to ensure that small businesses have a way to understand complex and technical federal regulations. The changes in Regulation Z are complicated and present the types of problems that section 212 was meant to address. Advocacy implores the Board to provide the necessary compliance guide in the immediate future. In addition, because of the complexity of this regulation, Advocacy respectfully requests that the Board provide small entities with additional time to comply since the small entity compliance guide was not made available at the time of publication of this rule.

If you have any questions regarding these comments or if Advocacy can be of any assistance, please do not hesitate to contact Jennifer Smith at (202) 205-6943.



Winslow Sargeant, Ph.D.
Chief Counsel for Advocacy


Jennifer A. Smith
Assistant Chief Counsel
For Economic Regulation & Banking

Cc: The Honorable Cass Sunstein, OIRA/OMB

[1] 75 Federal Register 58509 (Friday, September 24, 2010).
[2] Pub. L. No. 96-354, 94 Stat. 1164 (1980) (codified at 5 U.S.C. §§ 601-612) amended by Subtitle II of the Contract with America Advancement Act, Pub. L No. 104-121, 110 Stat. 857 (1996). 5 U.S.C. § 612(a).
[3] Pub.L. No. 96-354, 94 Stat. 1164 (1981), amended by Small Business Regulatory Enforcement Fairness Act of 1996, Pub. L. No. 104-121, 110 Stat. 857 (1996) (codified as amended at 5 U.S.C. §§ 601-612 (2000))
[4] See,
[5] 75 Federal Register at

Who's behind the Fed's Rule on Originator Compensation?


National Association of Independent Housing Professionals

Our Call to Action is working! The Fed's Paul Mondor to Marc Savitt: " is extremely annoying and is getting in the way of my ability to perform my work." See Mondor's full email and Savitt's response in the comments below.

National Association of Independent Housing Professionals Marc --

NAIHP members are clogging my in-box and my voice-mail. They are all the same, based on a "script" you provided them. There is no way I can possibly respond to them all. Perhaps you would be good enough, given that you precipitat...ed this situation, to convey this response to all your members (and whoever else you convinced to spam me). Perhaps you also would be kind enough to call a halt to the fruitless spamming; it is extremely annoying and is getting in the way of my ability to perform my work. I trust those were not your intended results.

The Board's loan originator compensation regulation has been issued in final form with an effective date of April 1, 2011. That date is highly unlikely to change, as the Board has taken final action and, to my knowledge, will not be considering any further action in this area. The Board is no longer soliciting or considering public comments because the final rule has been published. Many of the e-mails and voice-mails are revisiting arguments on the merits of the rule that were raised during the comment period and duly considered by the Board at that time; there is no further utility in raising them again. We appreciate that you have concerns about implementation, but in fairness the final rule gave over six months of lead time before the effective date. To argue now, with two-thirds of that time elapsed, that there is too little time to figure out how to comply strikes me as disingenuous at best. Finally, please also note that the Dodd-Frank Act effectively codified the Board's rule.

I hope this is clear enough.

Paul Mondor
Senior Attorney
Division of Consumer and Community Affairs, MS-804
Board of Governors of the Federal Reserve System
Washington, D.C. 20551
(202) 452-3667


Federal Reserve Board of Governors Senior Attorney · Apr 2007 to present · Washington, D.C. I write regulations for the Federal Reserve . . .




February 1, 2011

Brokers and originators from around the country are frustrated with their government's unrelenting campaign to eliminate their ability to earn an honest living. As such, they have an absolute right to protest this unnecessary, unreasonable and unlawful, final rule on originator compensation.

It doesn't matter to the tens of thousand, who are about to go out of business, that this rule is already finalized. In fact, the SBA Office of Advocacy doesn't care much either, as evidenced by their letter to Chairman Bernanke dated today. According to the SBA, the Board's recently submitted and long overdue compliance guide fails to meet the requirements under the law. "Advocacy is concerned that the guide may not meet the requirements of the Small Business Regulatory Enforcement Fairness Act (SBREFA). [1] Advocacy recommends that the Board amend its guide so that it is in compliance with the law."

These NMLS licensed professionals, don't know how they will support their families, after April 1, 2011. Moreover, this is exactly what President Obama was concerned about in his January 18, 2011 Executive Order. "Section 1. General Principles of Regulation. (a) Our regulatory system must protect public health, welfare, safety, and our environment while promoting economic growth, innovation, competitiveness, and job creation."

With respect to your comment about "not being able to work", think about this Paul. Should we care about your job when you're about to eliminate ours?

You also state in your email, "We appreciation you have concerns about implementation, but in fairness the final rule gave over six months of lead time before the effective date." Please explain to me, how you can call this fair, when you refuse to clarify in writing, any of the confusion this rule creates? How does industry prepare for a rule they don't understand and where their government refuses to offer no more clarification than a "copy and paste" compliance guide?

Lastly, the SBA suggests in their February 1, 2011 letter to Chairman Bernanke, this rule should be postponed, until you are in compliance. Although, a postponement or delay is certainly justified in this situation, the right course of action, is to withdraw the rule and defer to the CFPB.

I hope you now have a better understanding of the situation.



National Association of Independent Housing Professionals Keep the Call to Action going. Keep calling, until they fully understand what this rule will do to our industry, consumers and the economy.

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Posted by Robin Bain on February 4th, 2011 5:22 PM


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