Numerous mortgage brokers and loan officers apparently rushed to get as many loans as possible into the pipeline before their compensation plans changed this month.
But they rushed the wrong part of the process.
On March 31, the day before the Federal Reserve's compensation rule was originally scheduled to take effect, several firms saw an abnormally high volume of interest rate locks.
"Everybody was trying to get in whatever they could under the old plans," said Marc Savitt, president of the National Association of Independent Housing Professionals, a trade group for brokers.
A secondary marketing executive, who did not want to be identified, interpreted the spike in locks less charitably: "They talked borrowers into locking on a specific day, which is proof that loan officers work in their own interests."
If so, the joke's on them, for two reasons.
First, the rule applies to loans for which borrowers submitted applications on or after the effective date.
So rather than scrambling to get rates locked on the eve of the effective date, loan officers might have done better to take more applications.
Moreover, the rule did not actually take effect until April 5, because at the eleventh hour Savitt's group and the National Association of Mortgage Brokers — which had sued to block implementation of the rule — obtained a short-lived restraining order. That means brokers and loan officers had a few additional business days to take applications under their old payment plans.
The Federal Reserve rule bans any compensation tied to the interest rate or any other term or condition of the loan.
It also forbids brokers to "steer" a consumer to a lender offering less-favorable terms in order to increase the broker's pay.
The rule allows a mortgage broker or loan officer to be paid by the borrower or the lender but not both.
Employers like Matthew Pineda, president of Castle & Cooke Mortgage in Salt Lake City, have repeatedly told loan officers they could get paid the same based on other factors such as volume. Yet his firm recorded $11 million in interest rate locks on March 31 — the highest one-day volume in nearly a year.
"I would like to believe that loan officers were ignorant instead of that they didn't believe management," Pineda