At the invitation of Thompson Reuters Legal Insights and Analytics, attorneys Maryia Jones, Jason Manning, and Paige Fitzgerald delivered a presentation on TILA’s loan originator compensation rule (the “Rule”), which remains one of the CFPB’s enforcement priorities and a focus of plaintiffs’ bar in private lawsuits. The presentation was delivered to an audience of mortgage lenders’ in-house counsel and other financial industry professionals.
Since 2013, CFPB has ordered mortgage originators to pay a combined total of almost $10 million in restitution payments to consumers and $4 million in civil penalties through its enforcement actions for violations of the Rule. You can read more about these enforcement actions in our previous advisories from January 24, 2013, July 24, 2013, and December 2, 2014. In addition to the CFPB’s enforcement, plaintiffs’ bar has used the Rule as both a shield and a sword in private lawsuits against mortgage lenders. While TILA provides for a three-year statute of limitations for affirmative claims for violations of the Rule, there is no statute of limitations when a consumer asserts a violation of the Rule as a matter of defense by recoupment or set off to a non-judicial foreclosure or in any other action to collect the debt.
The Rule’s prohibitions against loan officers’ compensation based on transaction terms or “proxies” for such terms is a part of the CFPB’s broader set of restrictions against steering consumers into loans that are not in consumers’ best interests. The Rule has broad coverage and applies to all first- and subordinate-lien loans secured by a dwelling, with the exception of HELOCs. Furthermore, the Rule’s expansive definition of “loan originator” includes anyone involved in the loan origination, even in such innocuous activities as referring a consumer to a loan originator.