Our LO's are paid an incentive if they hit their goal. Their goal is a total loan volume. If they hit their goal they receive a % of the underwriting fee associated with the loans the they booked.

Its my understanding that this would be acceptable. I do not see any prohibited terms or proxies.

Would anyone care to disagree or be willing to give me piece of mind?

What does this mean: "receive a % of the underwriting fee associated with the loans the they booked"?

I would like to see that defined also, IMO it would be a "conflict of interest" if they get paid a % on loans they originate, underwrite, approve, and close.

Example: LO has a goal of $400,000 in loan volume this month. Underwriting fee is 1% of the loan amount. If the originator meets their goal ($400k) then they are paid a flat percentage of the 1% origination fee.

If I book $500k in loans I will exceed my goal– total underwriting fees are $5000 – LO gets 10% of the $5,000. The LO ends up with $500 for the month.

This is for the front line LO's, so they are only taking applications. The underwriting staff has a different method.

Giving them a percentage of the loan amount is fine. Referring to a percentage of the origination fees is problematic.

I thought so orignally, but the origination fee is based on loan volume. It would be no different than offering a flat .1% of volume if you exceed your goal.

You might think it is the same, but it is not. What if for some reason someone is granted a loan at 50 basis points. Don't tell me that never happens...........

I'm having trouble seeing your point. It’s been a long day and maybe I’m over thinking it, but how could a loan at 50 basis points change things? In theory it could qualify the customer for a larger loan, but that is possible under either model.

No, I'm saying what if the origination fee is not 1% on each and every loan. Saying you base your compensation on a percentage of the origination fee is a prohibited practice. Stick with loan volumes and forget any reference to origination fees.