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Preserving Mortgage Origination Choices for Today’s Consumer

Preserving Mortgage Origination Choices for Today’s Consumer
August 5, 2012 wpengine

SACRAMENTO, CA – mortgage professionals throughout California are taking a huge sigh of relief as United States Congressman Gary Miller introduces his “Preserving Consumers’ mortgage Origination Choices Act of 2011” (H.R. 2509). H.R. 2509 makes clarifications to the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank) language regarding compensation for mortgage originators.

As members of the California Mortgage Professionals (CAMP) work within the new rules set forth by the Board of Governors of the Federal Reserve System, they have found some of the well-intended interpretations of the Dodd-Frank measure limit their abilities to aid clients and pay their small-business employees properly. Certain members of Congress have raised concern over the same hardships.  Congressman Barney Frank sent a letter to the Federal Reserve in March instructing them to change their rules related to these exact issues. However, the Federal Reserve has still failed to act, which is why CAMP reached out to Congressman Miller’s office to help rectify the issues that affect mortgage lending nationwide.  Miller acted on CAMP’s request and introduced, the warranted and well received, H.R. 2509.

The current Federal Reserve rule states that a loan originator can only be paid an hourly or salaried wage when the consumer pays the originator compensation directly. This rule is inconsistent with standard pay structures found throughout the profession and limits compensation ability to small-business firms that are accustomed to paying their sales staff on a commission based pay scale. The rule results in the elimination of the consumer’s option to pay the compensation on the front end of the loan to allow for a lower interest rate.

In addition, the Federal Reserve rule prohibits a mortgage broker from altering their compensation amount once it has been disclosed to the borrower. While this appears to be a sound practice and common sense, it fails to give the mortgage broker the flexibility at closing to reduce compensation to address legitimate last-minute corrections that occasionally occur. Congressman Miller’s bill, H.R. 2509, addresses both of these issues.

First, the bill clarifies that a mortgage broker can compensate a loan originator with respect to the principal amount of the loan, but no other loan terms when dealing with a consumer paid transaction.

Second, the bill allows for a mortgage originator to reduce their compensation by 30% or less when requested by the borrower for the purpose of corrections at closing. Mortgage professionals strongly believe in the dream of home ownership, so by restoring the loan originator’s capability to reduce their compensation to help their clients realize this dream is critically necessary.

CAMP’s President Elect and Government Affairs Chair, Fred Kreger, stated yesterday, “We thank Congressman Miller for working with us to clarify the language in Dodd-Frank to ensure the Federal Reserve does not go beyond Congress’s intent.” The California Association of Mortgage
Professionals applauds Congressman Gary Miller on his efforts to clarify these specific intentions of Dodd-Frank while still protecting homebuyers.


The California Association of Mortgage Professionals (CAMP) was established in 1990 by mortgage industry leaders throughout the state. Today, CAMP’s members total more than 1,500 mortgage brokers and affiliated service providers across California. As an organization, CAMP furthers the mission of “integrity in lending” seeking to promote best practices, prudent governmental action, and professionalism in all sects of the mortgage industry.