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#1721003 - 07/18/12 01:40 PM pay more for purchase than a refi
Burgess Offline
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Joined: Jan 2004
Posts: 1,620
we pay commission based on the loan volume - so now we would like to do two different rates. Your total home purchase volume times rate $X - and your total refi volume times rate $Y.
I think you can do this, it is ok to pay a commission based on volume, and i cant find a problem with breaking that up between refi and purchase.
am i missing anything?
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#1721369 - 07/18/12 09:08 PM Re: pay more for purchase than a refi Burgess
AFaquir Offline
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AFaquir
Joined: Jan 2011
Posts: 763
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I don't think you are necessarily doing anything wrong... but with the intent of rules being to prevent lenders from paying MLOS for products or services differently based on loan terms, I think an argument could be made that setting the pay scale for refi's lower and purchases higher would go against the intent of the regulation.

I am not saying that the argument is a particularly strong one, but I could see someone challenging the effort and motivation put into "selling" refis versus going after purchases... In effect making your MLO's be more aggressive to getting new money in the door, so that they earn MORE money, for themselves and your evil money grubbing bank... (I kid of course)...

Ultimately, I think the MLO compensation rules are terrible and frustrating given that a car salesman can hustle me, sell me more car than I need and that's not a problem. A financial advisor can hustle me and make me invest in worthless stocks and lose "future" money solely to get a bigger commission, and that's not a problem. An insurance salesman can all hustle me and sell me insurance for things I don't need just to achieve a bigger bonus and that's not a problem... but an MLO sells a mortgage at .25% interest over the "crooked" LIBOR and its the worst thing that can happen ever...
Last edited by AFaquir; 07/18/12 09:10 PM.
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#1721453 - 07/19/12 01:42 PM Re: pay more for purchase than a refi Burgess
Dan Persfull Offline
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Dan Persfull
Joined: Aug 2002
Posts: 46,628
Bloomington, IN
From 1026.36 (Commentary)

3. Examples of compensation not based on transaction terms or conditions. The following are only illustrative examples of compensation methods that are permissible (unless otherwise prohibited by applicable law), and not an exhaustive list. Compensation is not based on the transaction's terms or conditions if it is based on, for example:

iv. Whether the consumer is an existing customer of the creditor or a new customer.


I think you will have potential issues basing the compensation on a purchase transaction vs. a refinance transaction.

However, if you base the compensation on a new customer vs. an existing customer then you should be within the scope of the regulation.
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#1721474 - 07/19/12 02:02 PM Re: pay more for purchase than a refi Burgess
#Just Jay Offline
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#Just Jay
Joined: Oct 2006
Posts: 14,390
Cheeseheadland
Agreed, if it is to the same LO. I feel you can pay a differing rate for refi and purchase if you direct the loan to a refi LO, or a Purchase LO, where the Lo or group of LO specialize int he certain category, then that may be workable.

Has anyone seen anything about perhaps what the FED considered to be an existing customer versus new?

We are looking to go this direction, but so many of our originations (majortity are sold immediately to the secondary market and not booked as portfolio) do not have deposit accounts with us. But they come back for their next purchase, or in the last few years every 8-15 months to refiance for a lower rate.
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#1818712 - 05/30/13 04:52 PM Re: pay more for purchase than a refi Burgess
Matt_B Offline
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Matt_B
Joined: Sep 2011
Posts: 1,648
A CU, Where Regs Don't Apply
Wondering if anyone has any updated opinions on this. Apparently we are wanting to explore paying MLO's more for purchase business than refi business.

It wouldn't involve specific MLO's doing one type or the other, all would be doing both types of loans, to both new and existing customers. We do a sizable amount of mortgage business with new customers, for both types of loans.

Curious to hear if the above opinions still hold true or if there are any new thoughts.
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