Circular
Federal Reserve Announces Final Rules to Protect Mortgage Borrowers from Unfair, Abusive or Deceptive Lending Practices That Can Arise from Loan Originator Compensation Practices
August 16, 2010
Circular No. 12237

The Federal Reserve Board has announced final rules to protect mortgage borrowers from unfair, abusive or deceptive lending practices that can arise from loan originator compensation practices. The new rules apply to mortgage brokers and the companies that employ them, as well as mortgage loan officers employed by depository institutions and other lenders.

Under the final rule a loan originator may not receive compensation that is based on the interest rate or other loan terms.  The final rule also prohibits a loan originator that receives compensation directly from the consumer from also receiving compensation from the lender or another party. Additionally, the final rule prohibits loan originators from directing or "steering" a consumer to accept a mortgage loan that is not in the consumer's interest in order to increase the originator's compensation.

See press release for full details.

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