Industry continues to wait for critical compensation reform
Nearly 10 months after the mortgage industry was notified of potential changes to a major element of mortgage lending, brokers still wait to see how changes might affect their livelihoods.
On June 4, 2025, the Consumer Financial Protection Bureau (CFPB) submitted a rulemaking to the Office of Information and Regulatory Affairs (OIRA) called “Loan Originator Compensation Requirements Under the Truth in Lending Act (Regulation Z); Rescission.”
Since then, at least publicly, there has been no update on what the CFPB is planning to do regarding LO Comp. With housing legislation and executive orders starting to ramp up, one mortgage attorney was a little surprised that one of those items didn’t contain updates to LO Comp.
Peter Idziak (pictured top), a senior associate and mortgage attorney at Polunsky Beitel Green, said that despite the changes proposed by President Donald Trump in his housing executive order, none of those changes had anything to do with LO Comp.
“What is interesting about the executive order that isn't in there is anything on revising or rescinding the loan originator compensation rule,” Idziak told Mortgage Professional America. “That is something the CFPB highlighted as a priority, with the rescission word after it. But we haven't really heard anything since then.
“That is one area where, if you're looking to affordability, the industry has complained about several aspects of the existing rule that we feel inhibit or outright prevent LOs from reducing compensation to benefit borrowers in certain situations.”
Movement behind the scenes
While there haven’t been any public changes announced for LO Comp, there have been continued discussions on Capitol Hill. Kimber White, president of the National Association of Mortgage Brokers (NAMB), told Mortgage Professional America that he has continued discussing the issue with the CFPB, including former heads of the organization Rohit Chopra and Richard Cordray.
“We’re still working with the CFPB,” White said. “We’ve had Chopra and we had Cordray both tell us that it had unintended consequences, that the 3% cap was supposed to be on the loan originators, not the broker business. We need to fix that.”
Idziak said that unless changes are made, some originators will have a hard time lending to lower-income borrowers, which hurts housing affordability.
“There seems to be a lot of agreement, at least with the trade groups, that the rule needs some revising,” he said. “There are aspects of it where it hasn't worked out well, like bond loans. Those are programs that can help first-time homebuyers and low-to-moderate-income homebuyers, but because of the compensation structure for those and the limits on it, and what you can do, it makes it hard to offer those products.”
The timing of the executive order might make its execution more challenging. Idziak notes that because the order requires major changes, it might have been better to issue it before the House and Senate took up their major housing bills.
“The other interesting thing is the timing of this executive order,” Idziak said. “Several of the areas that it addresses would require statutory changes. The order acknowledges that. It’s interesting because the way Congress operates a lot of the time is they tackle a topic through this sort of large omnibus legislation and then move on to something else.
“So it's a little late in the process to be directing agency heads to come up with statutes that need to be changed to implement some of these proposed changes. They might have more success if this had been introduced at the beginning of the process.”
Navigating enforcement challenges
With a slowdown in federal enforcement, Idziak noted that states and plaintiff firms have filled the gap in the meantime.
“I think at the state level, there is the state enforcement that seems to be ongoing, and we seem to be seeing plaintiff firms become more active,” he said. “It seems like they've noticed that there's been a pause in federal enforcement, and they are coming into that breach. The CFPB had a lot of proposed rulemaking in its spring roadmap, but nothing has really happened on that.”
Idziak said each presidential administration brings its own challenges when it comes to the enforcement of regulations. It is up to brokers, lenders, and legal counsel to stay on top of how each administration wants to handle these issues.
“Whereas in past administrations, the challenge, especially Democratic ones, was with regulation through enforcement,” he said. “All these guidance documents and very detailed information. The Trump administration is very ‘big picture,’ and so it's sort of the opposite problem. For example, section 10 of the order talked about ‘eliminating duplicative and burdensome licensing and registration requirements for MLOs and banks.’ And a lot of people in the industry are saying, ‘Well, you know, we're not sure exactly what that refers to.’”
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