NAMB, National Association of Mortgage Brokers Asks Fed for 12 Month Delay in Reg Z Changes

The National Association of Mortgage Brokers recently sent a letter to the Federal Reserve asking for a 12-month delay in enforcing changes to Regulation Z and for further clarification to loan originator compensation.

These changes, to protect borrowers, must be complied with by April 2011.

From the letter…

The National Association of Mortgage Brokers (“NAMB”) is extremely concerned about the
potential unintended consequences that are likely to follow the April 1, 2011 compliance
deadline for the Board’s final rule on loan originator compensation (“Rule”).

The Rule, by design, is a game-changer for the mortgage industry.  It forces the industry to re-
examine well-established and, until recently, legal policies and procedures, and requires
significant changes to the way in which loans are priced and the way that loan originators may be
compensated for their services.

While we acknowledge the Board’s efforts in promulgating the Rule and the Board’s intent to
change the way business is done in our industry, we are deeply concerned that the Rule is flawed
in certain respects and has yielded more questions than answers from both creditors and loan
originators seeking to comply with the Rule.

NAMB is concerned that the Board has no legal basis for treating mortgage broker companies
differently than other firms carrying out the same or substantially similar business operations.
Under the Rule, certain activities are prohibited as “unfair or deceptive trade practices” for one
class of mortgage market participant, while another similarly situated class of participants is
permitted to engage in the very same activities.

Over the past several years, our industry has been overwhelmed with legislative and regulatory
changes at both the state and federal levels.  Such changes have been economically burdensome
for the industry to plan for and keep up with, and the constant changes are having a profoundly
negative impact on the market.

You can check out the letter in its entirety below…



h/t leapfrog

NAMB, National Association of Mortgage Brokers Letter to the Fed on Reg Z

5 Responses to “NAMB, National Association of Mortgage Brokers Asks Fed for 12 Month Delay in Reg Z Changes”
  1. QNY81 says:


    You are correct that the option Arms paid the highest commissions. What you may not know is that when option Arms first came out, you had to put down 30 percent and they were for second homes or investment properties. Those were excellent instruments for the people that understood them, which were not many. The option Arm was good when you may not have been able to make the whole mortgage payment (renter was gone) and would pay less than the interest only for that month and catch up later. When the greed exploded, the banks were asking the mortgage brokers to get them clients and put them in option Arms in primary residences with 10% down or less. The problem is that the banks created and funded these loans, not the brokers. If we sold an option Arm, the four possible payments were discussed, not just the less than interest payment. There were too many people in the business in retail and wholesale that could barely do arithmetic selling “sophisticated” mortgages.

    Another issue is that the whole “subprime” debacle is a ruse. Fannie Mae and Freddie Mac bought a ton of stated income, no doc loans. They blamed subprime, but they are holding so many loans that if the interest rate rises, there will be another flood of foreclosures. The reason subprime exploded is because many realtors forced mortgage brokers to put prime borrowers in subprime loans so that the loan could close in 7 days. The realtor is usually the first point of contact in a house purchase. If a mortgage broker did not close a loan fast enough, the realtor would take the client and send him/her elsewhere. It did not matter to the realtor that the prime client could have gotten a better rate (takes longer), it needed to close asap. No one has blamed the realtors and they have no sanctions put on them at all for this mess. Only the mortgage broker has paid the price.

  2. It appears the banks are squeezing out mortgage brokers…that may be bad if you work at a mortgage funding firm. But going back say to 2003 …my daughter has a mortgage to prove… a broker working for a mortgage funding firm lied thru his teeth. He was pushing the ARM’s Optional mortgage and this mortgage was to be the latest greatest thing to happen to mortgages…. and this was on a re-fi with excellant credit rating. She wanted to lower the interest on her mortgage, cause interest was down. The firm he worked at closed their doors in 2007 cause they could not find funding for loans. But the broker who lied so bad still is in this city. They dealt with WaMu if that tells you anything. may be different with brokerage firms. But than again…who wasn’t crooked before the crap hit the fan and still are. Everybody dealing with the financial industry did mortgages that paid the highest commissions…and that was the ARM’s and sub-prime. The worse the loan was, the more money they made. Sorry to say, but I don’t trust any one dealing with financing today.

  3. leapfrog says:

    Interesting responses here, but I’m confused. Is this good or bad for consumers? I’m thinking anything that is good for the MBA is bad for the consumer. But having read the response by QNY, sounds like the banksters are trying to squeeze out the competition.

  4. QNY81 says:

    James M,

    I don’t think you understand what is happening. As a loan originator at mortgage brokerage company, I am at a disadvantage than a loan originator at a bank. That is what they are talking about. The mortgage brokerage company is in an unfair competition with the banks that write and break the rules. What you don’t see is that the banks want to take the mortgage brokerage out of business. We have access to many lenders and can provide a better program and rate than if you went directly to the bank where you only have their programs. That is why now if you shop for a rate, the banks make you buy an appraisal everytime you go to a different bank. Before that rule, the mortgage brokerage could use the same appraisal with 20 lenders and the consumer only bought it one time.

    The loan originators at banks do not have to be licensed. The whole licensing outrage was supposed to end this, but like always, the banks exempted themselves. So you will go to a bank and deal with a loan originator that knows very little compared to a loan originator at a mortgage brokerage that must be licensed and has access to many lenders. We keep the banks competitive, which is what they don’t like. Most of the fraud in loan origination comes directly from retail (banks) not wholesale (mortgage brokers).

  5. James M says:

    Seems to me that no business should be in the practice of “activities” that are “unfair or deceptive trade practices”. If they are not then complying with the regulation should be easy, if they are, then they should stop now and comply with the regulation.

    That the industry claims the “unfair or deceptive trade practices” are “well-established” and “until recently, legal policies and procedures”. That being unfair or deceptive was legal, in that it was not strictly outlawed, does not make it reasonable. We don’t care how long you have been doing it wrong, now they should straighten up and fly right, or get shot down in flames.

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