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#1783437 - 02/06/13 03:25 PM Referral fees if a home loan results
burgess Offline
Diamond Poster

Registered: 01/27/04
Posts: 1226
our loan people would like to pay any employee $100 referral fee if they refer someone to our home loan people and it results in a loan being made.

i don't see where the new MLO compensation rules would impact this. i don't think the referring of a customer combined with the fee received turns the ordinary employee into a MLO.

obviously any person receiving such a fee could not be a mlo.

does anyone see a problem with this?
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MLO Compensation Rule
#1783459 - 02/06/13 03:59 PM Re: Referral fees if a home loan results [Re: burgess]
Dani York, CRCM Offline
Power Poster

Registered: 04/13/05
Posts: 3243
Loc: TN
If you read the preamble, you will see that the CFPB interprets "offers" very broadly to include referrals (employee initiated solicitation of business, see pg 75-77 of the preamble). They even list an example of a teller who solicits a referral as engaging in loan origination activities.

That being said, you can pay a 100.00 flat fee incentive as that is permissible under the rule.

PS--The teller example is on page 78.


Edited by Dani York, CRCM (02/06/13 04:07 PM)
Edit Reason: correct page numbers and add teller example page number
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I can't herd the cats anymore, so I just set up the electric fences and let them fry when they stray out of bounds.

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#1783513 - 02/06/13 05:46 PM Re: Referral fees if a home loan results [Re: Dani York, CRCM]
burgess Offline
Diamond Poster

Registered: 01/27/04
Posts: 1226
Thanks Dani, that was very helpful. I really appreciate the page numbers.
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#1783640 - 02/07/13 10:08 AM Re: Referral fees if a home loan results [Re: burgess]
NotDoneYet Offline
Gold Star

Registered: 07/28/10
Posts: 398
Loc: PA
So the referral fee would then have to be included in the points and fees since its compensation for that transaction?
And would that teller then have to be registered as an LO?
I think both may be true so to avoid that situation, we won't pay for a referral.
Do you agree?
Thanks!

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#1783670 - 02/07/13 10:48 AM Re: Referral fees if a home loan results [Re: NotDoneYet]
Dani York, CRCM Offline
Power Poster

Registered: 04/13/05
Posts: 3243
Loc: TN
So the referral fee would then have to be included in the points and fees since its compensation for that transaction? I'm not sure, as I haven't gotten that far yet.


And would that teller then have to be registered as an LO? No, see page 351. "The Bureau is adopting....to provide that a loan originator must be registered or licensed when required by State or Federal law, including the SAFE Act,..." If the teller does not meet the 2-prong test under the SAFE Act, then they do not have to be registered. The referral in anticipation of a referral fee or bonus, does, however, make them a loan originator under Reg Z and the restrictions on compensation will apply.




Edited by Dani York, CRCM (02/07/13 10:49 AM)
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I can't herd the cats anymore, so I just set up the electric fences and let them fry when they stray out of bounds.

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#1807398 - 04/23/13 03:51 PM Re: Referral fees if a home loan results [Re: Dani York, CRCM]
river girl Offline
Platinum Poster

Registered: 11/18/04
Posts: 823
so I am reading this to say we can provide the $25 referral fee to an employee outside the mortgage division but if we pay the $25, we have to reflect the $25 in the points and fee test?

Does this $25 get reflected on the GFE and in the APR?

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#1807402 - 04/23/13 03:54 PM Re: Referral fees if a home loan results [Re: river girl]
Dani York, CRCM Offline
Power Poster

Registered: 04/13/05
Posts: 3243
Loc: TN
so I am reading this to say we can provide the $25 referral fee to an employee outside the mortgage division but if we pay the $25, we have to reflect the $25 in the points and fee test?
Yes.


Does this $25 get reflected on the GFE and in the APR? To my knowledge, not under the current rules. But it may be on the integrated RESPA/TIL document. We'll have to wait and see on that.
_________________________
I can't herd the cats anymore, so I just set up the electric fences and let them fry when they stray out of bounds.

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#1807410 - 04/23/13 04:01 PM Re: Referral fees if a home loan results [Re: Dani York, CRCM]
river girl Offline
Platinum Poster

Registered: 11/18/04
Posts: 823
Thank you Dani.

The points and fee test is the same test that we use under HOEPA? Maybe?

I am a one man shop so I haven't gotten through all this junk yet.

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#1807413 - 04/23/13 04:05 PM Re: Referral fees if a home loan results [Re: river girl]
Dani York, CRCM Offline
Power Poster

Registered: 04/13/05
Posts: 3243
Loc: TN
The points and fee test is the same test that we use under HOEPA? Maybe? As far as I can tell, yes. The circular referencing in these rules is nauseating!


I am a one man shop so I haven't gotten through all this junk yet. Misery definitely loves company, as I'm trudging right along with you. smile
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I can't herd the cats anymore, so I just set up the electric fences and let them fry when they stray out of bounds.

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#1812678 - 05/09/13 12:53 PM Re: Referral fees if a home loan results [Re: burgess]
JobSecurity Offline
Gold Star

Registered: 10/16/09
Posts: 343
It seems now that all employees at the bank fall under the new definition of ‘loan originator’ since the bank does give referral money out. I would interpret the wearing of a logo shirt as an ‘advertisment’ since the business card example is out there. It seems ridiculous, but until something else is clairified that is what we have to go on. Is that what everyone else that pays referrals is thinking? My next question has to do with the background checks and credit reports. Our credit reports have the option of giving a ‘background check’, if we ordered new credit reports on everyone and got the extra background check do you think that will satisfy the ‘from a law enforcement agency or commercial service’? I also did not see where this is an annual requirement or any follow-up requirement. Did I miss something?

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#1812746 - 05/09/13 02:15 PM Re: Referral fees if a home loan results [Re: JobSecurity]
Dani York, CRCM Offline
Power Poster

Registered: 04/13/05
Posts: 3243
Loc: TN
Originally Posted By: JobSecurity
Is that what everyone else that pays referrals is thinking?


Yes

Originally Posted By: JobSecurity
My next question has to do with the background checks and credit reports. Our credit reports have the option of giving a ‘background check’, if we ordered new credit reports on everyone and got the extra background check do you think that will satisfy the ‘from a law enforcement agency or commercial service’? I also did not see where this is an annual requirement or any follow-up requirement. Did I miss something?


It's my understanding that the requirement is a one and done kind of thing. As far as if the background check option will be sufficient, it would depend on what the background check option from your credit report provider covers. The background check requirement in the rule covers felonies and crimes of breach of trust at a minimum.
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I can't herd the cats anymore, so I just set up the electric fences and let them fry when they stray out of bounds.

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#1812765 - 05/09/13 02:37 PM Re: Referral fees if a home loan results [Re: burgess]
JobSecurity Offline
Gold Star

Registered: 10/16/09
Posts: 343
thanks

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