Top of the agenda: Respa.

The Department of Housing and Urban Development is expected to publish a Respa interpretive rule that will increase disclosures required of mortgage broker-originated loans, deny mortgage brokers a secondary market exemption for table funding and ban volume-based compensation, according to a copy of the rule obtained by Mortgage Marketplace.

The rule will become effective upon publication in the Federal Register, likely in November, said a mortgage banking lobbyist. The rule has been held up in internal clearance, reportedly over the volume-based compensation provision. One mortgage banking lobbyist predicted the clearance process will be resolved quickly. HUD interprets the three issues thus:

* Brokerage Fees Disclosures. Regarding Respa's sections 4 and 5, sections 3500.7 and 3500.8 of Regulation X, disclosure of mortgage broker fees, however denominated, is required, whether paid for directly or indirectly by the borrower or lender.

* Table Funding. The mortgage broker transaction commonly called "table funding," wherein the loan is closed in the mortgage broker's name with a short-term advance of a lender's funds, is subject to Respa disclosure requirements; it is not excepted from Respa as a secondary market transaction.

* Volume-based Compensation. Respa's disclosure requirements apply to the costs imposed on the borrower, directly or indirectly, through the point where the loan is funded by the actual lender. Accordingly, whether the mortgage broker identifies itself on the loan document as the lender, so long as it does not fund the loan with its own funds, the transaction does not qualify for the secondary market exception.

The proposed rule has attracted criticism from mortgage bankers. In their view, the table funding interpretation is unfair and they would like to see the language altered to consider a broker in a table funded transaction as a "correspondent lender," rather than a "broker," the term "correspondent lender" doesn't exist in the rule, but the Mortgage Bankers Association said the addition of that term would relieve confusion resulting from Respa's definition of the terms "lender" and "broker."

Respa defines "broker" as anyone who brings the borrower and lender together, said Paul Mandor, associate director of regulatory compliance for the MBA. The term "lender" refers to the party in whose name the loan closes. But in many cases, the positions can be juxtaposed and becomes confusing.

Adding "correspondent lender" to the rule would clear the confusion and remove some pitfalls created for lenders by the language.

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