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Loan Originator Compensation Requirements under the Truth in Lending Act (Regulation Z)

We are amending Regulation Z to implement amendments to the Truth in Lending Act made by the Dodd-Frank Act. The final rule implements requirements and restrictions imposed by the Dodd-Frank Act concerning loan originator compensation; qualifications of, and registration or licensing of loan originators; compliance procedures for depository institutions; mandatory arbitration; and the financing of single-premium credit insurance. The final rule revises or provides additional commentary on Regulation Z’s restrictions on loan originator compensation, including application of these restrictions to prohibitions on dual compensation and compensation based on a term of a transaction or a proxy for a term of a transaction, and to recordkeeping requirements. The final rule also establishes tests for when loan originators can be compensated through certain profits-based compensation arrangements. At this time, the Bureau is not prohibiting payments to and receipt of payments by loan originators when a consumer pays upfront points or fees in the mortgage transaction. Instead the Bureau will first study how points and fees function in the market and the impact of this and other mortgage-related rulemakings on consumers’ understanding of and choices with respect to points and fees. This final rule is designed primarily to protect consumers by reducing incentives for loan originators to steer consumers into loans with particular terms and by ensuring that loan originators are adequately qualified.

This page contains resources to help you understand the rule and its implications.

Contents

 

  1. The rule
    1. Effective dates
    2. Breakdown of the document’s contents
  2. Compliance guide and related information
  3. Related proposals
  4. What this means for consumers

 


The rule

Final rules submitted to the Federal Register

September 13, 2013: We issued a final rule amending certain provisions of the rule. It is based on a proposed rule issued in June 2013.
May 29, 2013: We issued a final rule delaying the effective date until January 10, 2014 for a provision prohibiting creditors financing credit insurance premiums in connection with certain consumer credit transactions secured by a dwelling.
February 15, 2013: The Office of the Federal Register published the final rule. View the rule as published in the Federal Register.
January 20, 2013: We issued the document containing this final rule. View the full document as issued.

Effective dates

The amendment to § 1026.36(h) is effective on June 1, 2013. All other provisions of the rule are effective on January 10, 2014.

Breakdown of the documents’ contents

This document contains the following parts:

  • Preamble summarizing why we are issuing the rule, our legal authority, reasoning behind the rule, responses to comments, and analysis of the benefits, costs, and impacts of the rule
  • Regulatory text, which, when effective, will amend Regulation Z and can be found on page 475 of the full document
  • Official interpretations of the rule, which can be found on page 488 of the full document

Compliance guide and related information

Read the Small Entity Compliance Guide to learn more about the rule in a plain language and FAQ format which makes the content more accessible for a broad array of industry constituents, especially smaller businesses with limited legal and compliance staff.


Related proposals

June 21, 2013: We issued a proposed rule with request for public comment that proposed certain amendments for several of the final mortgage rules we issued in January 2013. This proposal was published in the Federal Register on July 2, 2013. You can also review comments submitted on the electronic docket.

August 17, 2012: The Bureau issued its proposal for public comment. The proposal was published in the Federal Register on September 7, 2012. View the proposed rule, comments received in response, and Small Business Review Panel Report on the electronic docket.

May 7, 2013: The Bureau issued a proposal to temporarily delay the effective date of a prohibition on creditors financing credit insurance premiums in connection with certain consumer credit transactions secured by a dwelling. The proposal was published in the Federal Register on May 10, 2013. View the proposed rule on the electronic docket.


What this means for consumers

The new rule will go into effect on June 1, 2013. This summary outlines some of the ways we expect it to impact consumers who have residential mortgage loans. Download the consumer summary.

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