I've been hearing conflicting statements from some of our correspondent banks.

We are a Bank that has a secondary market program. We close in our name and fund on our own, then sell the loans to one of three correspondents.

I've gone over the compensation plan for our "Loan Originators" and feel pretty comfortable with it, as it's very simple and compensates on overall origination volume.

What's throwing me in to a tailspin, however, is remarks from some Correspondents regarding FHA Loans. Because the FHA considers us to be a "broker" (we have no dedicated FHA underwriter), are our LO's required to be compensated for *all* loans like a "Mortgage Broker”?

Help me understand this, oh wise BOL'ers…because if this is true, I have a lot of work to do to revise the compensation program.

I'm still trying to figure this out...

On FHA Loans, we are a "Broker", through no choice of our own.

When I read the Reg, the descriptions for Loan Originators and Brokers both state "...with respect to a particular transaction...". So does that mean that for some loans the lenders are considered a "Loan Originator" and others a "Mortgage Broker", and we have to compensate them differently? So I need to have two compensation plans or somehow roll the equivalent FHA-related income in to perhaps a base salary and then only consider non-FHA loans in the compensation plan?

This is really throwing me for a loop, as I really did not see this coming. Is anyone else facing the same challenge?

I'm registered for the FRB teleconference on this...I'm hoping that they address this scenario.

So, the FRB Teleconference was very UNhelpful. I was expecting so much more, and was agahast when the remark about referrals was made.

Sadly, I did not receive an answer to my question so I'm still stumped.

I know that FHA / Non-FHA cannot be compensated differently, and we're not going to. I'm just trying to figure out if our classification as a "Broker" on FHA loans means we have to treat our LO as a "Broker" for everything...

Argh!!

What the FHA considers you has no bearing on the compensation rules. If you close the loan in your name and fund the loan out of your own funds and then sell the loan on the secondary market, your bank is not a loan originator/broker for the compensation rules.

Well, that's the problem. Because of the changes with FHA, they consider us a broker and so even though we used to be able to close in our own name, our correspondents are not allowing that anymore. We do close in our name on everything else, but we just can't with FHA.

So, through no action of our own, we're a broker on FHA. Maybe I didn't explain that in my initial posts well enough...

So, I am beginning to think we're up a creek without a paddle on this ....

Then you are going to be limited on the compensation scheme on those loans, but only those loans.

Thanks for your responses.

I'm just concerned that having a different compnesation process for those loans will violate the "terms and conditions" element. In the FRB program yesterday, they stated that if the broker is compensated differently by loan product (e.g. FHA vs. Conventional) it's a violation.

Essentially, at the end of the day, we'd be aggregating the FHA Loans in with the Conventional Loans and paying the lender a flat percentage based on the total origination. That, to me, doesn't sound like we'd be compensating them differently ... I just am not 100% certain on that.

But you are not being compensated differently, as the bank is not a broker on the other loans. They are sold in the secondary market.

Is it really that simple? Sweet!