The CFPB's new mortgage loan originator compensation rules,released last week, prohibit originators from being paid morebecause the borrower's mortgage has a higher interest rate, aprepayment penalty, or higher fees.

Because credit unions don't typically pay for more profitableterms, the rule isn't expected to have a major impact on theindustry.

However, credit unions that sell mortgages to the secondarymarket should be aware that the new rule may prohibit them frompaying more for loans that will be held on the books.

CUNA attorney Mary Dunn said during the trade group's weeklypress call Tuesday that the CFPB included specific examples in thefinal rule to demonstrate when the practice is prohibited, and saidthe example indicates most credit unions won't be affected.

That example assumes lenders hold in portfolio only loans thathave short terms, often with balloon payments. Mortgages withtraditional 30-year, fixed terms, which typically have higherinterest rates, are comparatively sold to the secondary market.

The CFPB concludes that because the rates vary, and theoriginator could potentially steer borrowers into the portfoliomortgage, holding a mortgage in portfolio “is a proxy for a term ofa transaction.” Therefore, paying originators more for loans heldin portfolio, when accompanied by different rates “over asignificant number of transactions” is prohibited under therule.

The new rule also requires that all loan originators, even thoseworking at credit unions, meet the same character and fitnessrequirements, be screened for criminal backgrounds and undertakeongoing training about mortgage regulations.

That requirement, Dunn said, will result in a “significant”compliance burden for credit unions.

NAFCU President/CEO Fred Becker said despite the CFPB's goodintentions, the rule will “nevertheless add to the ever-increasing regulatory burden” on credit unions, which werenot responsible for the financial crisis.