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#1826985 - 06/25/13 01:24 PM MLO Compensation
Red Raiders Offline
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Red Raiders
Joined: May 2013
Posts: 1,069
Compliance Land
I have two questions:

1. Are we ok to have different compensation bps at different locations (in different markets). For example, compensation at one location is 15 bps of the loan amount and at another location the compensation is 25 bps of the loan amount. We are venturing into a new market and are finding that the compensation that works for our existing branches is out of line with the new market location.

2. Must a bonus being paid to an MLO be limited to 10% of overall compensation if it is based on the profits of the market location (unless the compensation is in the form of a 401k or similar plan contribution)?
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Loan Originator Compensation Rule
#1828151 - 06/27/13 01:40 PM Re: MLO Compensation Red Raiders
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Red Raiders
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Compliance Land
bump
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#1828157 - 06/27/13 01:49 PM Re: MLO Compensation Red Raiders
hgliii Offline
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Joined: Mar 2012
Posts: 574
IMO, 1. You can have a MLO Comp Plan with each individual LO paid different bps, as long as it is based only on the loan amount and not terms of loan.
2. This one is still muddy, look at the MLO Comp Guide sent out last week from CFPB. In it they cover the bonus question pretty thoroughly. Basically, it states it depends on how you calculate the profits.

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#1828470 - 06/27/13 08:00 PM Re: MLO Compensation Red Raiders
mhigham Offline
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Joined: Mar 2010
Posts: 6
Texas
What is the opinion on MLO compensation on a consumer residential interim construction loan? Our lenders are currently compensated based .10% of the loan amount only if a 1% or more origination fee is collected. Mgmt has exempted all consumer residential RE loans from the compensation program. Does, dwelling as defined by Reg Z, apply to interim loans since there is no inhabitable dwelling as of yet? My first thought is No, these types of loans would not fall under the MLO compensation rules, but confusion has set in with every re-read of the rules.

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#1828480 - 06/27/13 08:07 PM Re: MLO Compensation Red Raiders
hgliii Offline
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Joined: Mar 2012
Posts: 574
Does the MLO decide if a 1% origination fee is charged? If the answer is yes, then in my opinion you would have a problem. It still appears to be steering.
Last edited by hgliii; 06/27/13 08:10 PM.
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#1828482 - 06/27/13 08:11 PM Re: MLO Compensation Red Raiders
mhigham Offline
New Poster
Joined: Mar 2010
Posts: 6
Texas
Yes, which is why consumer real estate was taken out of the compensation package, to which I concurred. But would an interim construction loan fall under the same requirements? Of course, I want to it to be spelled out in the Reg in bold letters and flashing lights...it's a dream, I know. LOL!

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#1828996 - 06/28/13 06:53 PM Re: MLO Compensation Red Raiders
MyScamper Offline
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Joined: May 2006
Posts: 452
Between here and there
What about his scenario? Commecial LO is meeting with good commercial client who is looking for a residential mortgage loan to purchase a new home. CLO has rate sheet and discusses rates and term with customer. This would make him a loan originator. However, he then refers the customer to a MLO who takes app, sets rate and terms and actually originates the loan. MLO is the one who receives the compensation for originating the loan. CLO receives a referral fee of $100. Because the CLO is also a loan originator and the bulk of their compensation comes in the way of bonuses, is his total compensations subject to the 10% rule, even though he only received a referral fee for the loan?

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#1829363 - 07/01/13 07:08 PM Re: MLO Compensation Red Raiders
MyScamper Offline
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Joined: May 2006
Posts: 452
Between here and there
Bump.

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#1829436 - 07/01/13 08:56 PM Re: MLO Compensation MyScamper
Dani York, CRCM Offline
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Dani York, CRCM
Joined: Apr 2005
Posts: 3,663
TN
Originally Posted By: MyScamper
CLO receives a referral fee of $100. Because the CLO is also a loan originator and the bulk of their compensation comes in the way of bonuses, is his total compensations subject to the 10% rule, even though he only received a referral fee for the loan?


He is a loan originator because he received a referral fee for soliciting the mortgage loan and referring it to the mortgage department. Any bonuses based on profitability would be limited to 10% of his overall compensation, unless he met the de minimis of 10 or fewer covered loan originator activities. So if his only Reg Z covered loan originator activity is soliciting referrals and he did not solicit more than 10 referrals that resulted in an origination, the bonus would not be limited. In order to invoke the de minimis, you will need to set up some sort of tracking system to prove that the bonus is not limited because the LO met the de minimis test.
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