Management is considering offering employees (other than lenders)a bonus vacation day for referring new customers for loans. A referral card signed by the employee would be provided to an individual and the employee would become eligible if the individual applies for a loan and turns in the referral card. I am concerned that this advertisement and referral with incentive (vacation day) will qualify these non-lender employees as loan originators under the new rules. Any guidance would be greatly appreciated.

Part of the test to determine if an individual is an LO is wether they, for compensation or other monetary gain: "Refer a consumer to a loan originator or creditor."

Compensation means salaries, commissions, or any other financial or similar incentive. I'd venture to say a paid vacation day fits into this category.

As for Referrals, the only way an employee can refer without being an LO is when the consumer has asked for information first. And then they are limited to providing contact information for the lender. It sounds like soliciting referrals outright would make your employees LOs.

I'd be interested to hear if others have differing opinions.

In our establishment, we have stopped with referral payouts on Mortgages, due to our interpretation of the rules. Previously if employee made a referal, when it closed, would pay them $50, not huge amount, but something. How we read the new rules, this would make them LO's, and would require them to be registered, fingerprinted, NMLS #, etc. It's unfortunate that Congress couldn't have written it better, I understand what they were attempting to do, but wrote it poorly. Anyways, we read the "new rules" the same as appears you are.

You'd have to be very careful with how your employees handle the referrals. If an employee recommends, refers, or steers a customer to a particular loan originator than that employee is considered as an LO, regardless if you are paying them any kind of referral fee. There is more information on pages 11300-1301 of the federal register.

Definitions of an LO are different under TIL than they are from SAFE. Just because they are a LO under TIL, does not make them an LO under SAFE, unless of course you have funny more restrictive state rules.

Just trying to get some clarification. Would paying a bank employee a referral fee for obtaining contact information for a consumer interested in a mortgage loan cause the employee to be considered a MLO under Reg Z? The fee would be paid regardless of whether the loan closed or not.