This is an opinion post and I welcome any Loan Officers and Realtors to comment with their opinions and questions.
About 6 months ago the Federal Reserve posted a rule that is scheduled to take effect April 1, 2011 . Our industry groups have been fighting this since the rule was posted. As of March 8, with no success in stopping this rule two industry groups filed suit in Federal Court to stop this rule from taking effect. This was done because all efforts had failed to have the Federal Reserve postpone and review the effect this will have on many Loan Officers.
The date and the rule is for real and this is NOT an APRIL FOOLS JOKE.
As simply as it can be said, if the RULE takes effect April 1, any loan officers that you know will be under a new income or compensation program. According to the Federal Reserves rule, the Loan Officers income can only be based upon one thing and that is the Amount of the borrowers loan. And that income can either be a fixed percentage of the loan amount or a fixed dollar amount per loan.
Imagine the loan officers compensation program is 1% of the Loan Amount. With a $50,000 loan how many loan officers will want to do that Loan? Then imagine a $200,000 loan, the loan officers commission would be $2,000. The loan officer would love this, however in order to be competitive the pricing (Rate of Interest or Closing Costs) on this loan would likely be higher than their competitors. Some would say, well just reduce your income to get the buyer to use you. Great idea, however the Federal Rule Prohibits this. Only their employer can reduce their income/profit to allow this to occur. Will employers want to do this?
Fast forward to Realtors. Imagine if your employment contracts called for your Broker to only offer you a fixed percentage of the sales price of the property or a fixed dollar amount per sale. NOT and either or per transaction, your compensation would have to be determined in advance and stay in effect for a reasonable time period. This would mean no more 30/70, 40/60, 50/50, 60/40, 70/30 compensation programs.
With Loan Officers, the talk is that a three month period might be a reasonable period to change our income/commissions programs. I should not that any new income/commission agreements can not be based upon the income you generated for your Broker. our commission schedule can be changed every three months.
I wish comments, pro or con, from Realtors about their feelings if their income and lively-hood is changed by a rule like this. Any lenders, I ask that you correct any of my statements, about the impact on Loan Officers and if the same logic that the Federal Reserve used could be applied to Realtors.
Anyone wishing to reblog this post, please do it. The more groups that it appears in the more people will see and read what may be coming in the future. Credit of course would be appreciated.