Lenders may have lost their battle with HUD to have mortgage broker and wholesale lenders'table-funded transactions classified as secondary market transactions in Respa.
In a Real Estate Settlement Procedures Act draft interpretive rule obtained by the Mortgage Marketplace, department outlines its disclosure requirements for mortgage broker fees and charges. In the draft rule, HUD said that table funding is not a secondary market transaction and is, therefore, subject to Respa disclosure requirements.
Table funding is a common method mortgage brokers use to close a loan in the broker's name using short-term advances from wholesale lenders.
HUD Housing Secretary Nick Retsinas told Senate Banking Subcommittee Chairman Sen. Paul Sarbanes, D-Md., in an Oct. 15 letter that the draft rule would clear departmental clearance in December.
The Mortgage Bankers Association has contended that table-funded transactions should be exempt from Respa. The trade group cited a Financial Accounting Standards Board decision last year to allow wholesalers to treat brokered loan transactions as secondary market purchases for accounting purposes so long as the broker was independent of the wholesaler and sold to more than one wholesaler.
The MBA said there is conflict because FASB considers the method as a secondary market transaction, yet HUD does not.
The draft rule also said that volume-based compensation is not permissible compensation under Section 8 of Respa or Section 3500.14(b) of the Revised Respa Rule because it is not related to additional services being performed by the mortgage broker, but on the number of loans delivered.