Loan originators need to understand that times have changed RADICALLY! It is not just a matter of who can pay you and support your business, but also a matter of who will keep you out of trouble and offer the security you need to thrive. This is just a short list of what you should consider. Make sure you read the guidelines because you are responsible too!
Making a move in today’s market requires more thought than ever before. Please consider the following:
- Will the company be offering QM and Non-QM loans come January? If they only offer QM loans will that affect your production?
- How are they paying you? If it sounds creative beware! Now is not the time for creative compensation plans. You are now liable just like the mortgage company. As I tell several of my top producing friends; just because an attorney gives you the opinion that you can, doesn’t mean you should. Why? If the CFPB doesn’t like it, you have to defend it!
- If you are being hired as a branch manager and you are offered override on your branch; this income is limited to 10% of your total income for the year.
- It doesn’t matter what position you hold in a mortgage company. If you do more than 10 loans per year, you are a loan originator and subject to the restrictions on LO Comp.
- If the company offers trips, merchandise and other incentives, they fall into that 10% bucket mentioned in #3. It doesn’t matter how they label it, if it is of value it goes into your 10% bucket!
- If you are offered ownership in a company, it must be a true ownership and your compensation cannot exceed the percentage of your ownership in the company. So, if the company made $1,000,000 and you own 1% then you can only receive up to $10,000 and that will not be included in the 10%. If you are offered award of stock, stock options or equity interest it is generally viewed as compensation and that will go into the 10% bucket.
- If there is any way that your compensation may be construed as a term of the transaction, it may be ruled as unacceptable. When this occurs all parties get fines and possible restitution.
- Salaries are okay and deferred income programs such as 401K’s are okay per the limitations in the guidelines.
- Pooled loan compensation programs are not okay.
- Point banks are not okay.
- Beware of compensation packages that offer you different compensation based on product or program type. This may be construed as “steering”.
- You can receive bonus on performance criteria that is not tied to a term of the transaction. However, remember that goes into the 10% bucket too.
- Do not accept income for selling other products from an affiliate of the creditor. However, if the product is a non-loan origination product you can receive commission.
- If you are a Loan Originator Organization (broker, not a creditor) you may not receive compensation from the consumer and split it with the actual loan originator because this is viewed as a term of the transaction.
- If you are a broker and the wholesaler tells you that you can switch to borrower paid comp and reduce your comp., provided it doesn’t exceed the % of the lender paid comp, do not do it. Not only will this hurt you in a fair lending exam (and the wholesaler too), but it is considered a term of transaction.
There is so much more to learn. Remember this is your career so stay informed. I strongly recommend you read the implementation guidelines.
Go to http://www.consumerfinance.gov/regulatory-implementation/. If you are still unsure, email the CFPB and they will answer the question for you.
These are my opinions and should not be construed as legal advice.