Daniel M. Shlufman, Esq, with Classic Mortgage LLC writes, “Rob: With respect to amounts paid on LPC vs. BPC, though I can’t say how the CFPB will eventually decide or change this, I am pretty confident on the way it should be decided based on the intent of the Anti-Steering provisions. That is, that these two types of compensations should be treated differently. The Anti-Steering provisions were designed to prevent brokers from raising interest rates on the borrowers in order to obtain additional compensation (previously, accurately called Yield Spread Premium due to their impact on the rate) from lenders. These anti-steering provisions were not designed to limit the fees that the brokers could make in a properly disclosed agreement with a borrower.
“If a broker was charging a fee to the borrower (and not collecting a fee from the lender) as long as the borrower agreed to the amount of this fee (and it was not so high as to create a high cost loan or violate any other law) it was permissible. Note, the Qualified Mortgage Rule has changed this slightly with the 3% cap on all broker/lender fees. But, even prior to QMR, lenders generally capped the BPC fees at 2.5-3.5% in any event. The incongruity, however, is that no matter how much of a fee the broker receives and whether it is higher or lower in BPC or LPC the amount due to the MLO based on the Loan Officer Comp rules will be the same. For example, on a $200k loan, with the loan officer comp at .75, the MLO receives $1,500 whether the broker gets paid 2% (or $4,000) on LPC or 3% (or $6,000) on BPC! So, these distinctions between LPC and BPC will never benefit the MLOs. They generally will be purely related to increased profitability of the mortgage brokerage company!”
His note wraps up, “The irony is that Dodd Frank and the regulations thereunder will actually end up hurting the very people who are the source of the business relating to the companies’ profitability! The mortgage industry may now be the only business where the ‘rainmakers’ are mandated by law to potentially be inversely rewarded for increased profitability of their company (and vice-versa)! Beyond ridiculous! So, all that said, I believe that under the law the amounts paid on LPC and BPC are permitted to vary.” Thank you Dan.