Prophecy is above my pay grade, but if I were a betting man - which I'm not! - I would bet on a postponement of the TILA loan officer compensation requirements currently scheduled to go into effect on April 1, 2011. Rarely have I seen such a messy roll out of a regulatory change that actually affects virtually all aspects of the mortgage banking industry in general, and mortgage brokers in particular.
Because I'm not a betting man, I hope for the best outcome for industry stability, but will prepare for the "alternative." Our clients will be as prepared as possible, whatever the situation, come April 1, 2011!
I base my prognostication on the following grounds. You can find many of the supporting documents on our website.
Perfect Storm - Exhibit 1: Congress
Perfect Storm - Exhibit 2: SBA Office of Advocacy
Perfect Storm - Exhibit 3: Lawsuits and Consternation
Perfect Storm or Safe Harbor
The new loan officer compensation requirements have produced a plethora of webinars, lectures, training videos, questionnaires, surveys, so-called automated solutions, breakout sessions, magazine and news articles - a virtual cottage industry of Google Ads proclaiming "End-to-end mortgage automation solution for bankers and lenders," and "Confused About Dodd-Frank Changes? Sign Up For Onsite/Webinar Training."
In many of the aforementioned venues, speculation is a proxy for regulatory fact. Having a famous speaker or bigwig compliance professional opining on uninterpreted and unclarified TILA statutes makes me uneasy. There just is no replacement for regulatory guidance. Period!
Here's the reality: the largest loan originators and creditors will fend for themselves in this de facto unregulated environment, and all others will fall in line, unless and until the FRB provides clarification or delays implementation. Otherwise, the notion that the large originators get to make the interpretation of federal statutes, in the absence of the FRB interpreting them concisely, unambiguously, and cogently, is all a bit too Darwinian for my taste!
This is precisely why FRB regulations are promulgated: to assure a stable market and to avoid large companies determining for all the other companies what the FRB means. Furthermore, impact of the new loan officer compensation rules on the industry is a fundamental feature of any such foundational change to the residential real estate finance market. How is it even conceivable that such a change can be implemented without comprehensive impact studies required by federal statutes?
This is not a wave, but a tsunami of confusion with no safe harbor in sight - yet!
I am not a prophet, but betting on a delay seems like a good bet!
Be prepared to implement the loan officer compensation rules on April 1, 2011 - and be sure to consult competent compliance professionals for guidance - even if this dynamic environment continues to cause confusion and ambiguity. But, in the absence of the FRB adequately responding to its role in this debacle it is also wise to do what you can to stand up for the greater good of all market participants.