One industry veteran explains why brokers need to be engaged in potential changes to the LO Comp rule
The work never ends for organizations lobbying on behalf of mortgage brokers nationwide. With the trigger lead ban bill on the precipice of being signed into law, another issue will soon have the full attention of the industry: loan originator compensation.
Brendan McKay (pictured top), chief advocacy officer and co-founder of the Broker Action Coalition (BAC), said that LO comp rule changes have been at the top of mind for brokers long before the CFPB issued a notice that it might want to rescind the rule entirely. However, that action immediately heightened the focus on potential changes.
“LO comp is at the top of that list, and it's something that brokers have been wanting us to work on since the inception of the BAC, and now it looks like the timing is right to do so,” McKay told Mortgage Professional America. “The CFPB put some information out there like they might rescind LO Comp altogether, and they got a very immediate response from the industry, like, ‘We understand what you're trying to achieve, but that would be disastrous.’”
While the broker community has long sought changes to LO compensation, simply erasing the rule without replacing it would be bad for the industry.
“This legislation was put together and definitely needs some reform, but pulling it out without having something there to replace it is not going to get the result that anyone's looking for,” McKay said. “Our expectation was that we would see a proposed rule change, which is kind of how the CFPB typically does things. They put out a proposed rule change, and then the industry has time to give feedback, which hasn't happened.”
Dealing with the 3% cap
McKay acknowledged that CFPB staffing has declined, and that the current administration has shown a preference for doing things its own way, even if it’s not the traditional approach.
“This administration has shown an inclination to be a little non-traditional,” he said. “It’s just not happening very quickly, but we don't want to be in a position where things start moving quickly without the input from mortgage brokers in the wholesale channel.”
While not going into specifics of all the reforms the BAC hopes for, McKay provided several critical but general points that the organization hopes will serve as starting points for potential LO comp reform. The first step is to ensure that rescission is off the table.
“One issue that I know will be the top of our wish list, our first goal is to make sure that disaster (rescission) doesn't happen,” McKay said. “Because these regulations are very clunky, and understandably so, since they were written in the time of a global economic crisis. They were put together in a hurry, but it is the type of thing where if you pull the wrong wire, the whole thing falls apart. So we want to make sure that doesn't happen.”
Another significant issue is the 3% cap for brokered loans. While some may question why the cap needs to be removed, McKay said it seems to go against the free market that broker compensation is capped, but nobody else in the transaction has a cap on their compensation.
“We want to start making improvements, and at the top of the list would be removal of the 3% cap for a brokered loan,” McKay said. “Currently, a broker can't make more than 3% and effectively 2.75% because of lender fees, on any transaction. Now, a lot of people would say, ‘Well, why do you ever need to make more than 3% on a loan?’
“First of all, I don't think, when you're talking about a free market situation, I don't think anybody should be telling anyone else how much money they can or cannot make, as long as you're not being abusive and structuring in a way that violates QM laws. Why is our comp capped, and no one else is?”
Limiting competition
McKay also points out that in some markets with smaller loan amounts, it may be almost impossible for brokerages to operate, which reduces competition in those markets. This makes things worse for consumers as well.
“I can make the real argument that most brokers don't need to make 3%,” he said. “I operate at McKay Mortgage at a below 2% comp, and removing the cap would not change that. But there are other very different markets in this country that don't have mortgage brokers in that market, because you can't run a profitable mortgage brokerage in an area where the average loan amount might be $70,000, and there might be some credit challenges.
“Running a business off a 3% compensation in the market like that is unviable, and as a result, those consumers see a less competitive market and a more narrow offering of mortgage products as a result. The consumers end up losing at the end of the day because of that cap. So that is something we're going to push hard for.”
The National Association of Mortgage Brokers (NAMB) is urging vigilance as the CFPB continues its review of the Loan Originator Compensation (LO Comp) rule.https://t.co/aep5DZszbN
— Mortgage Professional America Magazine (@MPAMagazineUS) August 25, 2025
McKay urges brokers to reach out to BAC and other organizations to make sure they are getting regular updates on any potential changes to LO compensation. In the meantime, McKay and the BAC are working to put together a coalition of industry companies to take this new fight to Capitol Hill.
“We’re putting together a coalition or working group of organizations and companies that are interested in focusing on the wholesale side of the conversation and making sure we're just going to be proactive with it,” McKay said. “We're going to put together a formal letter that we may or may not make public, but we'll definitely deliver to the CFPB and make sure that this doesn't happen without the input of brokers.
“We're optimistic that this administration is very much in favor of the free market, and the wholesale channel is the freest and most open market of our industry. We think that our points will be well received, and we're looking forward to getting organized and together.”
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