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Government Sued Over LO OT Ruling

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A federal lawsuit has been filed against the government over the reversal of its position on originator overtime.

A complaint was filed Wednesday by the Mortgage Bankers Association in U.S. District Court for the District of Columbia against the Department of Labor, a news release said. The case was filed under the Administrative Procedure Act.

MBA said it seeks to set aside the department’s Wage and Hour Division Administrator’s Interpretation No. 2010-1 from March 24, 2010.

According to the trade group, the interpretation reversed and withdrew a 2006 opinion letter to MBA that interpreted the department’s own regulations and concluded that typical loan officers were exempt from Fair Labor Standards Act requirements for overtime payments under the “administrative exemption.”

MBA said that the mortgage industry relied on the 2006 opinion letter and operated on the basis that originators qualify for the administrative exemption under the FLSA.

The abrupt reversal of the 2006 ruling by the Labor Department has created unnecessary litigation for mortgage lenders.

MBA Chairman Johns A. Courson said in today’s statement that the department should have provided notice and an opportunity for public comment if it wanted to reverse the 2006 opinion.

“In issuing this administrative interpretation, the department ignored that statutory requirement,” Courson stated. “This abrupt reversal by the department not only opens lenders up to lawsuits for past actions, but also could require them to make costly changes to their internal operations and compensation structure, costs that will ultimately be borne by the consumer.”

The trade group’s chief explained that originators won’t see increased compensation just because they are required to be paid for overtime. In addition, loan officers will lose their flexible schedules if they have to track and report their hours.

MBA seeks to set aside the March 2010 ruling and require that the Labor Department follow the rulemaking procedure if it wants to reverse the 2006 ruling.

“The suit also urges that, because the DOL’s interpretation in the administrative interpretation is contrary to the plain language of the regulations and the preamble interpreting them, the administrative interpretation is arbitrary, capricious, an abuse of discretion, and otherwise contrary to law,” the news release stated.

The trade group hopes that by winning in court, the 2006 interpretation will stand — providing an administrative exemption for loan officers from overtime and preventing enforcement, application and implementation of the administrator’s interpretation.

MORTGAGE BANKERS ASSOCIATION, 1717 Rhode Island Avenue, NW Suite 400, Washington, D.C., 20036, Plaintiff, v. HILDA L. SOLIS, sued in her official capacity, Secretary, United States Department of Labor, Frances Perkins Building, 200 Constitution Avenue, Washington, D.C., 20210; NANCY LEPPINK, sued in her official capacity, Deputy Administrator, United States Department of Labor Wage and Hour Division, Frances Perkins Building, 200 Constitution Avenue, Washington, D.C. 20210; UNITED STATES DEPARTMENT OF LABOR, Frances Perkins Building, 200 Constitution Avenue, Washington, D.C. 20210.
Case No. , Jan. 12, 2011 (U.S. District Court for the District of Columbia).

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