You might be asking yourself, “Has this guy finally flipped his lid? R-1366? Sounds like an experimental drug – this is supposed to be a MORTGAGE blog.” My friends, R-1366 could indeed be viewed as an experiment – one that will reshape the residential home finance industry and possibly bring large chunks of it to its knees. You’re probably already familiar with it by its trade name – the Loan Originator Compensation Rule.
I discussed the LO Compensation Rule at length in a previous post the day after it was released, so I’m not going to rehash it in this post. However, in case you haven’t been following the biggest story in the industry since the collapse of the subprime market, you can catch up with the details here. The bottom line is that there are multiple legal interpretations on how this rule will affect businesses and LOs – on what is legal and what is not legal – and to date the government has provided minimal guidance to help the industry understand how to remain compliant.
There is some good news, however. As I write this, representatives of the National Association of Mortgage Brokers are on Capitol Hill testifying in hearings on the implementation of the Dodd-Frank bill. Additionally, the House Financial Services Committee issued its oversight plan for this session of Congress and has included a hearing on loan officer compensation. The committee has stated that it has some concern that the “rules will have an adverse impact on small businesses who originate mortgage loans and their ability to remain in business.” While this is just a hearing on the rule, it is good news and a big step in the right direction. It shows that an organized call to action can have some effect. NAMB will be in Washington on March 14 and 15 holding its 2011 Legislative and Regulatory Conference, which will include a day of advocacy on Capitol Hill. Many concerned mortgage professionals will be present to make their voices heard.
Now, regardless of what happens with the Fed rule, there WILL still be opportunities in the mortgage business. People will always need money, and money is what we sell. Even if the compensation rule goes into effect with no changes, those of us still in the mortgage business are in a good position. Under the new rule, however, where you work will become just as important as how you work. The truth is that you have 44 days until the way you earn a living changes. Yes, there are continuing efforts to delay or overturn the rule, but you cannot count on them being successful. Do you understand your employer’s upcoming compensation plan? Does your employer even have a plan? Do your employer’s lenders and/or investors have a plan? If so, do you know what those plans are? Now is the time to ask the tough questions well in advance of April 1. No one else is going to look out for your business or your income if you don’t.