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#1508129 - 02/10/11 05:54 PM
MLO Compensation Policy
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Diamond Poster
Joined: Jan 2010
Posts: 1,028
Utopia
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Where does the MLO Compensation policy rest in your bank? Is it part of HR or do you have a stand alone policy? Does anyone have a policy or part of a policy they could share?
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#1508798 - 02/11/11 03:50 PM
Re: MLO Compensation Policy
Soccer
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100 Club
Joined: Apr 2010
Posts: 170
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Our bank would love some guidance on this as well. Any help would be greatly appreciated.
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#1512865 - 02/22/11 04:24 PM
Re: MLO Compensation Policy
cbrewster
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Georgia Plum
Unregistered
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We actually decided to close our one man mortgage department due to the compensation changes. Guess regulators won again. They want the community banks to fail, one more nail in the coffin.
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#1513290 - 02/23/11 01:21 PM
Re: MLO Compensation Policy
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Platinum Poster
Joined: Nov 2005
Posts: 614
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Are we required to have a policy on MLO compensation?
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CRCM
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#1513307 - 02/23/11 01:45 PM
Re: MLO Compensation Policy
MarieR
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10K Club
Joined: Aug 2002
Posts: 47,530
Bloomington, IN
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We have 4 different MLOs. 2 full time and 2 part time. Each are paid a flat percentage of their total loan volume in addition to a salary. Compensation is negotiated individually based on their experience, performance and employment status. The agreed upon compensation is maintained in each MLO's personnel file.
Whether they do $100,000 in volume or $1,000,000 in volume they are paid X%. The percentage does no fluctuate based on volume.
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The opinions expressed are mine and they are not to be taken as legal advice.
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#1518460 - 03/07/11 09:39 PM
Re: MLO Compensation Policy
Brock
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10K Club
Joined: Nov 2002
Posts: 20,656
The Swamp
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Yes, I see a problem with them going for the larger loans which could lead to disparte impact, although is really no different from %/loan amount any way you cut it.
Last edited by RR joker; 03/07/11 09:41 PM.
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#1521368 - 03/14/11 05:45 PM
Re: MLO Compensation Policy
Brock
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10K Club
Joined: Oct 2006
Posts: 14,390
Cheeseheadland
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I encourage you to reread the commentary on the new rules as that exact set-up is expressly prohibited going forward.
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#1521445 - 03/14/11 07:35 PM
Re: MLO Compensation Policy
Brock
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10K Club
Joined: Oct 2006
Posts: 14,390
Cheeseheadland
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Federal Register /Vol. 75, No. 185 / Friday, September 24, 2010 /Rules and Regulations page 58521:
In response to commenters’ concerns
that the proposal would provide
originators with no incentive to
originate small loans, the final rule
explicitly permits creditors to establish
minimum or maximum dollar amounts
for loan originator compensation. To
prevent circumvention, the commentary
clarifies that the minimum or maximum
amount may not vary with each credit
transaction. Thus, a creditor could
choose to pay a loan originator 1 percent
of the amount of credit extended for
each loan, but no less than $1,000 and
no more than $5,000. In this case, the
originator is guaranteed payment of a
minimum amount for each loan,
regardless of the amount of credit
extended to the consumer. Using this
example, the creditor would pay a loan
originator $3,000 on a $300,000 loan
(i.e., 1 percent of the amount of credit
extended), $1,000 on a $50,000 loan,
and $5,000 on a $900,000 loan.
However, a creditor may not pay a loan
originator 1 percent of the amount of
credit extended for amounts greater than
$300,000, and 2 percent of the amount
of credit extended for amounts that fall
between $200,000 and $300,000. In
addition, the Board notes that creditors
are able to use other compensation
methods to provide adequate
compensation for smaller loans, such as
basing compensation on an hourly rate,
or on the number of loans originated in
a given time period.
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#1666290 - 02/16/12 05:17 PM
Re: MLO Compensation Policy
Soccer
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10K Club
Joined: Oct 2000
Posts: 27,750
On the Net
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Also wondering how banks address chargebacks. Say a loan earns a bank $X. The loan is sold, but pays off early. If the bank is hit with a chargeback on any of the earnings it was paid, is that hit passed on to the MLO?
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Rules and Regs minus Relationships equals Resentment and Rebellion. John Maxwell
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#1666482 - 02/16/12 07:56 PM
Re: MLO Compensation Policy
Soccer
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10K Club
Joined: Oct 2006
Posts: 14,390
Cheeseheadland
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We do not, and IMO opinion, based thus far on the Fed's verbal response to the Mortgage Bankers Association, it is not permitted on a case-by-case basis. From the MBAs December 2010 letter to Bernanke 2. Permissible compensation. If compensation cannot be based on a transaction’s terms, on what can it be based?
A. Fed Response - Compensation that is not based on a loan’s terms may include:
i. The loan originator’s overall loan volume (i.e., total dollar amount of credit extended or total number of loans originated), delivered to the creditor.
ii. The long-term performance of the originator’s loans.
iii. An hourly rate of pay to compensate the originator for the actual number of hours.
iv. Whether the consumer is an existing customer of the creditor or a new customer.
v. A payment that is fixed in advance for every loan the originator arranges for the creditor (e.g., $600 for every loan arranged for the creditor, or $1,000 for the first 1000 loans arranged and $500 for each additional loan arranged).
vi. The percentage of applications submitted by the loan originator to the creditor that results in consummated transactions.
vii. The quality of the loan originator’s loan files (e.g., accuracy and completeness of the loan documentation) submitted to the creditor.
viii. A legitimate business expense, such as fixed overhead costs.
ix. Compensation that is based on the amount of credit extended.
3. For purposes of (ii) above what is meant by long term-performance?
A. Fed Response - The term means any reasonable period of time over which the overall performance of an originator’s loans can be measured including the time in which early payment defaults or payoffs occur. “Long term performance” is intended to cover overall performance of the originator’s loans not the performance of individual loans. The language was not intended to require or permit loan-by-loan claw back based on loan performance. Lenders can consider early payment default or payoffs in overall loan originations of the originator with regard to the originator’s future compensation or bonuses.
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