In 2016, Worry Less About MSAs and More About Compensation
While marketing services agreements caused a stir during the second half of 2015, the mortgage industry has a more pressing issue at hand: loan officer compensation. The Consumer Financial Protection Bureau’s deputy assistant director for originations announced recently that the agency would focus its exams on loan officer compensation in 2016. Also mentioned as focal points are the Truth-in-Lending/Real Estate Settlement Procedures Act integrated disclosures and Ability-to-Repay rules. The bureau will be auditing in retrospect — in other words, engaging in backward-looking audits — and giving little leeway or grace period after the effective date of the respective regulations. Ultimately, lenders of all sizes should pay careful attention to these remarks. State regulators often take cues from the CFPB and it is likely that the CFPB’s agenda will be replicated at the state level. Notably, if a lender has historically had compliance problems, a potential enforcement action can be greatly mitigated if a lender self-identifies and corrects deficiencies prior to discovery by a regulator. While MSAs will remain a hot button issue, the agency indicated that its position for the next 12 months is to take more of an evaluation perspective before determining how to best examine compliance with MSA guidance in 2017. Further, the CFPB publicly stated affirmatively — for the first time — that it did not believe that all MSAs are illegal. The agency apparently remains very concerned about MSAs but the much-reported demise of the marketing services agreement may be a premature conclusion.