Mortgage loan officers are now entitled to a 40-hour work week and overtime pay, after the U.S. Supreme Court unanimously ruled that the Department of Labor was within its rights when it chose to reclassify loan officers as non-exempt employees who are eligible for overtime.
The ruling stems from a 2010 decision by the Department of Labor to reclassify loan officers. That decision itself was a reversal of a 2006 decision by the Department of Labor that changed loan officers to exempt status.
When the Department of Labor made the change in 2010, it prompted the Mortgage Bankers Association to sue, claiming that the 2010 interpretation of the rule violated the Administrative Procedures Act by failing to follow procedures already laid out for changing significant rules, including not providing notice and time for public comment on the rule change.
The MBA won in the Court of Appeals for the D.C. Circuit in 2013, but the suit was appealed all the way to the Supreme Court.
In ruling on the suit, Perez v. Mortgage Bankers Association, the Supreme Court said that the Department of Labor did not violate the Administrative Procedures Act when it made the change to the loan officer rule.
“Because an agency is not required to use notice-and-comment procedures to issue an initial interpretive rule, it is also not required to use those procedures to amend or repeal that rule,” Justice Sonia Sotomayor wrote in the consensus opinion.
The MBA said that it was “disappointed” by the decision, but is ready to move forward and help its members work within the confines of the rule.
“MBA hoped that the court would uphold the lower court decision in our favor, so obviously we are disappointed with the final outcome,” an MBA spokesman said in a statement to HousingWire. “We will now work with our members to develop approaches to this issue that hopefully do not unduly increase borrower costs or compromise customer service.”
While the decision was unanimous, several of the Supreme Court’s conservative-leaning justices issued separate concurrences, in which they expressed concern over the precedents that the ruling may set.
“The creation of that doctrine may have been prompted by an understandable concern about the aggrandizement of the power of administrative agencies as a result of the combined effect of the effective delegation to agencies by Congress of huge swaths of lawmaking authority, the exploitation by agencies of the uncertain boundary between legislative and interpretive rules, and this Court’s cases holding that courts must ordinarily defer to an agency’s interpretation of its own ambiguous regulations,” Justice Samuel Alito wrote.
Justices Antonin Scalia and Clarence Thomas also wrote concurrences cautioning on the impact of the ruling from a national perspective.
The ruling will certainly be felt throughout the mortgage industry, although one of the nation’s largest lenders says the ruling won’t affect how it operates.
According to a report in the Detroit Free Press, Quicken Loans said that the Supreme Court’s ruling will have limited impact on the company because it already offers overtime to its loan officers.
From the Free Press:
"This ruling will have no effect on how Quicken Loans pays its mortgage bankers," company spokesman Aaron Emerson said in an email.
Emerson added later Monday that "Quicken Loans offers its mortgage banking professionals a salary, overtime and bonus pay."
Click here to read the Supreme Court’s decision.