In my ongoing analysis of how the NAR settlement might impact real estate professionals, it’s essential to look back at historical precedents in the mortgage industry. Two significant regulatory changes—the SAFE Act and the 2013 Loan Originator Compensation Rule—provide valuable insights into the potential effects on employment and compensation within the industry.
The SAFE Act: Establishing a Standard for Licensing
The Secure and Fair Enforcement for Mortgage Licensing Act of 2008 (SAFE Act) was introduced in response to the financial crisis, aiming to enhance consumer protection and reduce fraud. The act mandated that all mortgage loan originators (MLOs) register with the Nationwide Multistate Licensing System (NMLS) and meet specific educational and testing requirements.
The SAFE Act led to a more standardized and professionalized workforce but also increased the regulatory burden on loan originators. This change likely contributed to the initial decline in the number of licensed MLOs as some left the industry, unable or unwilling to meet the new requirements.
2013 Loan Originator Compensation Rule: Shaping the Market
The 2013 Loan Originator Compensation Rule, under the Truth in Lending Act (Regulation Z), was another significant regulatory shift. This rule prohibited compensation based on loan terms, aimed to eliminate steering consumers towards higher-cost loans, and introduced stringent recordkeeping requirements.
The rule’s phased rollout, effective January 10, 2014, altered the landscape for loan originators by restricting how they could be compensated, which impacted their income structure and potentially the overall number of practicing MLOs.
Impact on Licensing and Industry Trends
As shown in the chart, sourced from the NMLS, the number of state-licensed MLOs fluctuated between 2011 and 2016. This period saw both regulatory changes and market adjustments post-2008 financial crisis. Notably, a drop in licensing numbers occurred around 2013 and 2014, possibly reflecting the impact of the new compensation rules and other regulatory pressures.
Looking Ahead: Analyzing Income Trends
Next time, I’ll delve into data from the Bureau of Labor Statistics (BLS) to examine occupation and income numbers for MLOs and other related roles. I’ll look back to 2007, just before the financial meltdown, to identify trends and potential correlations between regulatory changes and income fluctuations. This analysis will help us anticipate how similar regulatory changes might affect real estate agents and brokers under the new NAR settlement.
Stay tuned as I continue to explore these critical issues. Your feedback and insights are invaluable, so please share your thoughts on these developments.