Will Rogers
reportedly said, "The difference between death and taxes is that death
doesn't get any worse when Congress meets." Derek B writes, "I am
wondering if anyone else thinks the statement '...the CFPB has issued a final
rule that amends the Equal Credit Opportunity Act...' is cause for concern. I
thought only the Congress could amend laws. I understand that the CFPB operates
without Congressional oversight (which is another concern) but is it the 'new
normal' that an agency of the Executive Branch now has legislative power?
If so, has Congress become irrelevant and is the industry been so intimidated
by the CFPB that it won't fight back? It seems to me that lending in
general is in a slow death spiral caused by ever increasing draconian
regulation. It seems to me that what is going on can only be described as the
R.R.O.B. principle. Restrict, Regulate, Outlaw and Ban!"
I am no attorney,
but as I understand it, the main difference between rules and laws is the
consequences associated with breaking them and how penalties are assessed.
The weight of a law is much heavier than the weight of a rule: laws are
enforced by a higher governmental office, usually the police, prosecutor's
office, or court, whereas rules are often enforced, and penalties assessed, by
the institution that makes them. According to the internet, where everything is
true, "An act is an official copy of a statute or regulation that is
initially presented in the form of a bill and after being verified it is passed
in the process of a legislature. An act is enforced in a legal manner. In
context to an act, rules define the guidelines that must be followed for the
successful implementation of the act."
Banks vs. Non-Banks LO Licensing
"I am still
wondering what the thought process is with the CFPB's lack of enforcement
requiring Loan Officers with bank owned mortgage companies becoming licensed.
As a regional manager, I have interviewed LO candidates who failed their test
or background checks for licensing and then they walk down the street to a bank
owned lender and go to work. So how does working for a bank lender make
an LO a better qualified LO? But the more important question I have for
the leaders of bank owned mortgage companies; if your bank is committed to
providing the best trained loan officers in the mortgage business why doesn't
your bank require your LOs to pass the licensing test, and the same background
requirements that each state requires to become licensed? Why does a
government agency have to mandate or make it a regulation for a bank lender to
require LO testing if they truly want to provide their customers with the most
ethical, knowledgeable and best trained loan offers? All Realtors have to be
licensed and all appraisers have to be licensed, so what is the thinking with
excluding loan officer with depository lenders? The issues that brought
about Dodd Frank and the CFPB were not restricted to just non depository
lenders; the bank lenders were right in the middle of it too. I think we
all want a level playing field and the goal should be to provide the most
ethical and knowledgeable loan officer so our consumers are protected! The
CFPB is supposed to be all about protecting the consumer; not protecting the
banks."
A producing
branch manager from Florida writes, "I have a very good understanding of
all the new and older regulations that have "wounded" our industry
for the past several years. There are two specific items that I just can't get
my arms around and both concern Dodd/Frank. Issue one is LO compensation where
a 100% commissioned loan officer is willing to take a commission reduction
based on a consumer shopping rates. To be clear, why can't an LO offer up
some of the compensation when trying to get their next deal? It seems to me
that the entire purpose of Dodd/Frank was/is to help consumers get the best
rate/price on every transaction. As the market becomes even more competitive
and LO's fighting over deals based on price, 70% of commission earned is better
that 0%. In this scenario, the consumer wins as they will most likely get a
better rate as the company may be more inclined to close the loan with less
revenue know they do not have to pay full commission.
"Issue #2
involves not being able to 'hit' a LO for various things that may have been
disclosed incorrectly (non-collection of required fees or initial mistakes
in disclosing costs at disclosure). Correct me if I am wrong but if the loan is
'under-disclosed', the LO still receives full commission and the company takes
the monetary hit (100%) to their bottom line. To make this EVEN MORE crazy, I
know for a fact that many, if not all mortgage bankers have built in
're-capture' language in their various compensation plans recovering
commissions paid out to LO's for early payoffs and early payment defaults. This
seems totally against Dodd/Frank especially when a client pays off early or a
loan goes bad. The LO did NOT underwrite the file nor issue the final loan
commitment. The file was and is underwritten by a series of "folks"
as it goes through the process and yet when the loan defaults, the LO is
charged back their commission (they are being penalized monetarily on a
transaction).
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