Last last night, the Court of Appeals for the District of Columbia Circuit issued a stay of the implementation of the new rules that would have changed the way mortgage loan originators needed to be compensated.  The news rules were scheduled to take effect today, April 1, 2011.

The final rules, if enacted, would apply to all persons who originate loans, including mortgage brokers and the companies who employ them, as well as mortgage loan officers employed by depository institutions and other lenders.

Among other things, the final rules:

• Prohibit payments to the loan originator that are based on the loan’s interest rate or other terms.  Compensation that is based on a fixed percentage of the loan amount is permitted.
• Prohibit a mortgage broker or loan officer from receiving payments directly from a consumer while also receiving compensation from the creditor or another person.  This means that the loan officer must either be “borrower paid” or “lender paid.”
• Prohibit a mortgage broker or loan officer from “steering” a consumer to a lender offering less favorable terms in order to increase the broker’s or loan officer’s compensation.

The court’s stay was in response to a motion for emergency relief filed by the National Association of Mortgage Brokers (“NAMB”).  The court has also ordered the government to file a response to the motion for emergency relief by April 4, 2011, and ordered NAMB to file any reply by April 5, 2011.  The court will issue a decision after receiving the submissions from the parties.

You can view a copy of the final rules here.  You can view the court’s stay order here.