The National Association of Independent Housing Professionals is giving up — for now — on its legal battle against the Federal Reserve Board to block the agency's just-implemented loan officer compensation rule.
"Our board voted to withdraw the lawsuit," said the NAIHP's president, Mark Savitt. "There are other avenues we're looking at pursuing." He would not say what those avenues may be.
Last month the NAIHP and National Association of Mortgage Brokers sued the Fed, asking for a temporary restraining order, and then a stay, to block the rule, which puts strict limits on broker compensation. The groups lost a round in federal district court in Washington, but were then granted a stay.
They subsequently lost when the Fed appealed and won, but have the option of filing new motions in the case. The two groups' lawsuits were combined at the Fed's request. Late last week the NAMB did not respond to questions about its plans.
A chief complaint of the NAIHP is the Fed's prohibition on brokers' crediting certain costs to borrowers by giving up compensation — a maneuver that results in their earning less but gives them a competitive advantage over bankers.
Givebacks offer consumers an incentive to close with brokers, a tactic that is no longer available to these third-party salesmen.
Just after the NAMB and NAIHP lost their court challenge, Southern Trust Mortgage Co. of Virginia Beach told its brokers that it would leave the channel, citing "increasing compliance implications" tied to the Fed rule and saying it will focus on retail production. Its intention to leave the wholesale channel was mentioned in a letter issued to its brokers.
