The mortgage loan originator rules, part of the Truth in Lending Act’s Regulation Z, protect homebuyers from anti-competitive practices, like double-dealing or steering activities, that lead consumers into more expensive loans.
The Consumer Financial Protection Bureau is on the economic impact of the mortgage loan originator rules on small mortgage companies. We may use the feedback we receive to inform potential changes to the rules. We regularly conduct 10-year reviews of rules that have, or will have, a significant economic impact on small businesses. The mortgage loan originator rules are due for this standard review process.
Mortgage loan originator rules
The mortgage loan originator rules cover individuals or companies that are paid to arrange, negotiate, or obtain mortgage credit for their customers. Mortgage lending companies, mortgage brokers, and loan officers may be considered loan originators. The rules prohibit dual compensation and steering practices that do not benefit borrowers, as well as prohibit compensating loan originators based on the terms of a mortgage transaction.
Before the rules, loan originators did not have to act in the best interests of clients. They could even be paid to steer homebuyers toward more expensive mortgages. For example, a loan originator acting as a mortgage broker could receive greater compensation from a lender for locking a homebuyer into a mortgage with a higher interest rate than the interest rate offered by another lender.