The Consumer Financial Protection Bureau released a clarifying report this week that says that Regulation Z of the Truth in Lending Act does not ban loan originators from participating in employee-stock or 401(k) plans.
The CFPB released the report to clarify questions that were raised last week pertaining to the loan originator compensation rule stemming from loan conditions.
“The Fed staff had informally advised that profits were considered a proxy for loan terms or conditions, thereby raising concerns about the legality of loan originator participation in qualified plans funded with mortgage lender profits,” the CFPB said in the report, according to Housing Wire. “Apparently, the FDIC had informally taken the position that the compensation rule prohibited the participation of loan originators in qualified plans.”
The CFPB added that even though the bureau has received questions regarding how the compensation rule applies to profit-sharing, the bureau will not be addressing that area as of yet but intends to clarify in the future, Reverse Mortgage Daily reports.
Following the clarifying report, the American Bankers Association praised the CFPB for issuing guidance but said that there is still much to be accomplished.
“The guidance is welcomed by the industry but ambiguous elements still remain in the mortgage loan originator compensation rules,” the ABA said, according to Reverse Mortgage Daily.
The CFPB must issue a final rule on loan originator compensation rules before the deadline on January 21. The agency said that it plans to seek public comment on a proposed rule soon.