Following a similar lawsuit earlier this week by an association whose members include loan originators, a mortgage broker trade group has filed its own lawsuit against the Federal Reserve Board.
On Monday, the National Association of Independent Housing Professionals filed a complaint in U.S. District Court for the District of Columbia against the nation’s central banker.
The trade group said it wants to prevent the implementation of the Fed’s Regulation Z rule, which the association claims restricts compensation to mortgage brokers and loan originators. Reg Z implements the Truth in Lending Act.
On its Web site, NAIHP president — and past president of the National Association of Mortgage Brokers — Marc Savitt says that industry professionals approached both trade groups about working together. While NAIHP immediately accepted the invitation, the brokers declined.
Now, NAMB has sued the Fed. The case was reportedly filed in U.S. District Court for the District of Columbia.
The trade group seeks temporary and preliminary restraints enjoining the implementation of a specific section of the Fed’s final rule on loan originator compensation.
NAMB says it is concerned because mortgage brokers would be prohibited from paying their loan officers commissions based on borrower-paid fees.
“This section of the Federal Reserve Board’s rule, as presently drafted, could cause devastating and irreparable harm to small business mortgage brokers, their loan officers and their entire staff as of the rule’s April 1, 2011 implementation date,” an NAMB press release said. “In spite of requests from various industry trade associations and the U.S. Small Business Administration Office of Advocacy, the Federal Reserve has turned a blind eye to the unintended consequences of this rule and to the resulting limiting of the credit opportunities available to consumers.”
But NAIHP doesn’t think the broker group is using the right strategy. NAIHP reportedly already has two months of work into its lawsuit.
“While I’m glad NAMB has finally come to this realization and caught up to the rest of the industry, I’m concerned they’ve decided to go it alone,” Savitt’s online statement says. “I am again urging NAMB to join our legal team, where much of the legal preparation has been completed.”
National Association of Independent Housing Professionals Inc., 601 Pennsylvania Avenue, N.W., Suite 900, Washington, D.C., 20004, Plaintiff, v. Board of Governors of the Federal Reserve System, 20th Street and Constitution Ave., N.W., Washington, D.C., 20551, Defendant.
March 7, 2011 (U.S. District Court for the District of Columbia).
