Compliance Blog

Written by Steve Van Beek

I've been wondering if and when the CFPB would start issuing guidance to regulated entities on the existing regulatory requirements the CFPB inherited.  It seemed the CFPB's focus - outside of examinations and inquiries - was placed on making sure they met their Dodd-Frank deadlines for adding new regulatory requirements on financial institutions.  

With that lead-up, on April 2nd the CFPB issued Bulletin 2012-02 which seeks to clarify an area of 12 CFR 1026.36 of Reg Z on mortgage loan compensation.  Prior Bulletins from the CFPB can be found here.

Bulletin 2012-02.  The CFPB stepped into an area that had caused quite a bit of confusion since it was enacted (and the Fed's Webinar last March seemed to muddy the waters more).  The rule itself - 12 CFR 1026.36 - prohibits the payment of compensation based on the loan terms or conditions.  The staff commentary takes this prohibition into grayer waters by extending the prohibition to any factor that might be used "as a proxy for a term or condition."  As you can imagine, there has been quite a bit of confusion and the CFPB's Bulletin seeks to provide clarity in one area.

Qualified Plans  The Bulletin includes this description of the questions received:

"The Bureau has received several questions about whether and how the Compensation Rules apply to qualified profit sharing, 401(k), and employee stock ownership plans (collectively, "Qualified Plans"). 

The CFPB answers the Qualified Plan question as follows:

"To provide clarify at this juncture, the Bureau's view is that the Compensation Rules permit employers to contribute to Qualified Plans out of a profit pool derived from loan originations.  That is, financial institutions may make contributions to Qualified Plans for loan originators out of a pool of profits derived from loans originated by employees under the Compensation Rules."

Non-Qualified Plans.  The CFPB declined to comment or provide clarity on other profit-arrangements/plans that are not Qualified Plans.  However, the CFPB indicated they would address this in a future rulemaking required by Dodd-Frank.

Not the Last Word.  While clarity is usually welcomed, this particular clarity might not be long-lived as Section 1403 of Dodd-Frank requires the CFPB to adopt loan originator compensation rules by January 21, 2013.  According to the Bulletin, "the Bureau anticipates issuing a proposed rule for public comment in the near future on the loan origination provisions in the Dodd-Frank Act."  These new rules will also have the potential to change the CFPB's interpretation on Qualified Plans (but credit unions can rely on the Bulletin until then).  

In other words - we'll have continued confusion and lack of clarity as well as another round of proposed and final regulations on mortgage loan compensation.  And people wonder why Dodd-Frank creates regulatory burden?  

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The April 2012 NCUA Report is now available.  I was very glad to see this put in writing by NCUA regarding the timeframe for the Equal Housing Lending poster:

• Updates nondiscrimination requirements for credit union operations (Part 701) to reflect the recent designation of NCUA’s Office of Consumer Protection to hear Fair Housing Act and Equal Credit Opportunity Act complaints. Credit unions engaging in real estate-related lending will have a reasonable amount of time to post updated Equal Housing Lender signs in public areas.

From Page 5.  As usual, the NCUA Report is a useful resource to review to get the latest directly from NCUA.