Congress reformed loan originator practices due to the mortgage crisis and recession through the Dodd-Frank Act. The CFPB’s new Loan Originator Compensation.

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Loan Originator Compensation

Presentation transcript:

Congress reformed loan originator practices due to the mortgage crisis and recession through the Dodd-Frank Act. The CFPB’s new Loan Originator Compensation Rules go into effect on January 10, 2014.

Compensation Prohibited form basing a LO’s compensation on “any of the transaction’s terms or conditions.” Compensation includes salaries, commissions, and any financial or similar incentive. Compensation based on interest rate, annual percentage rate, collateral type, or the existence of a prepayment penalty, among other things is prohibited.

Compensation Prohibits: Compensation based on a proxy. Reducing compensation to offset the cost of a change of transaction terms.

Dual Compensation When a mortgage loan originator receives compensation directly from a member in connection with a mortgage loan they are not allowed to receive compensation from any other person or organization in connection with the transaction.

Compensation – Non-Deferred Profit Based Plans Allowed as long as: Compensation is not directly or indirectly based on the terms of the originators transactions; and Aggregate compensation for the period does not exceed 10% of the originators total compensations; or Originator closed 10 or fewer transactions in the 12 months prior to the date the compensation is determined.

Licensing & Registration Follow S.A.F.E. Act guidance Comply with: State laws and licensing requirements; or Federal laws and licensing requirements.

Training Periodic Training is required that is sufficient in frequency, timing, duration and content to ensure that loan originators have the knowledge of state and federal regulatory requirements that apply to the employee’s loan originator activities.

ID Requirements Covered loan documents must include: Credit Union name and NMLS or state registry organizational ID Loan originators name and NMLS or state registry ID

Thank you for joining me for this overview of the CFPB’s Loan Originator Compensation Rules. Stay Tuned……..