Are the following actions by the new Consumer Financial Protection Bureau (CFPB) fair to all or draconian against mortgage-loan originators?
The rules prohibit compensation that varies with the loan terms. A broker or loan officer cannot get paid more if the consumer takes a loan with a higher interest rate, a prepayment penalty, or higher fees. Moreover, the mortgage originator cannot get paid more if, for example, the consumer agrees to buy title insurance from the lender’s affiliate. Previously, LOs could make more money by getting the consumer to buy these services from the lender, broker, or one of their affiliates.
Under the CFPB’s rules, the loan originator cannot get paid by both the consumer and another person such as the creditor. In the run-up to the crisis, too often consumers incorrectly assumed that their loan originators were looking out for the consumer’s best interest.