How are other bank's planning on compensating their MLO's after 4-1-11 when we can no longer base our MLO commissions on the loan's interest rate or other terms according to Dodd-Frank.

Flat dollar amount per loan or percentage based only on loan amount.

That is all we could think of too. Thanks for you input Randy.

We are going to do the same thing, but are trying to figure out what is a fair amount per loan. Can anybody share the amount that they pay to their originators?
We were thinking about 65 basis points per loan...

Our MLO's are currently paid either straight commission or base plus commission. The commission is based on volume:
1.$0-5,000=0
2.5,0001 to 10,000= 20bps
3.10,000 to 12,500= 35bps
4.12,501 and above= 50bps
I believe that our current system is fine. What is everyone else doing in regards to policy? Is the contract enough or does it belong in the HR policy?

Over what period is that?? is that a month or??

And is that overall production for said period, or per loan?

Straight commission is paid out monthly, Base plus commission is paid on a quarterly basis and is subject to the Originator meeting certain base level targets so as to assure that year end performance target minimums are attained

Those don't look like mortgage loan volumes.

Attended a webinar yesterday and learned that the DOL ruling not only requires payment of Overtime, it also requires a minimum wage be paid. Our MLO is commission only. Some months he may have nothing close. Consequently he would get no pay. But with the DOL ruling, in those months we'd be required to pay him the minimum wage. Just another thing to factor into the new compensation package.

So, would it be prohibited to base a commission based on the gain the bank gets on sale to the secondary market? I'm thinking so since the gain is "rate" based.

Yes. The bank could only charge an amount and pay a commission based on percentage of loan amount, not any terms such as rate or term of the loan.

I don't know if you've recieved a response to your compensation schedule, but I presented a similar schedule to the ABA and was told that it violated the rule. We're going to go to a flat percentage for all loans.

Hmmm.. My understanding is that the FED has blessed this com structure since the comp is not based on the terms of any one single loan. The comp is based only on aggregate loan volume levels, and the numbers needed to reach thatose levels would not be consistent form period to period, whatever you choose that period to be. Thus the comp would not even be directly based on the terms of any particular loan.

I guess I'm not understanding this. Our compensation is based on the total loans per month not the value or specific product of each individual loan, and each month starts a clean slate. Like Just Jay described.

Is there any documentation from the FED where they have belssed the tiered compensation structure? We currently have that in place and would like to keep it.

Maybe I am just being paranoid, but knowing how lenders think (because I used to be one myself), if they are compensated on a % of the loan amount...does anyone get concerned about possible Reg B violations? Because I guarantee that the lenders are going to steer clear of low income areas, or areas with low home values, etc. because they know they aren't going to make as much off of those loans.

How do you pay them now??

Currently, we have a minimum commission in place.

I do agree though, this could become a problem.

Our real estate area is made up of mostly low to moderate priced homes. With some limited areas of higher end homes. We only have 2 MLO's that cover all of our lending area but I can see your point in regards to steering clear of low income areas.

It's always bother me basing a fee on a % of a loan amount. It's age-old, but does wreak of discrimintory and red-lining issues.

We act as a broker and we pay for the appraisal and credit report up front and collect at closing. If we accept compensation from the creditor can we accept payment from the borrower for the appraisal and credit fees?

That is a cost of services and should have nothing to do with compensation. You pay for the credit report and the appraisal and then credit at closing, or retain for payment, if the loan doesn't close. Any overage should be refunded to the borrower.

Would it be permissible to compensate an MLO at a different fixed percentage based on a loan's purpose (different for a refinance compared to a purchase transaction)?

Would a loan's purpose be considered a term or condition or a factor that is a proxy for a loan term or condition?

How are you all handling profit sharing and/or bonuses based on profitability that can no longer be paid? Are you coming up with a new program for these employees or are they just being excluded?