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#2101331 - 09/30/16 08:42 PM Mortgage Loan Originator Compensation - turnaround
morirse de risa Offline
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Midwest
We are considering paying our loan originators if they process the loans and are able to close the loan with a quick turnaround time between application and closing (i.e. 30 days instead of 45 days). Since loan time isn't technically a term of the loan, would this be an issue for originator compensation restrictions?

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Loan Originator Compensation Rule
#2101347 - 10/01/16 05:45 AM Re: Mortgage Loan Originator Compensation - turnaround morirse de risa
Inspector Offline
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You have to pass two hurdles, compensation on a term of the loan and compensation on a proxy for the term of the loan.

Someone with more experience would have to weigh in but perhaps the time to close could be a proxy as certain loan types or terms may consistently close faster than others?

It seems that compensating this way could encourage cutting corners as well. Just my thoughts.
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#2101349 - 10/01/16 11:31 AM Re: Mortgage Loan Originator Compensation - turnaround morirse de risa
rlcarey Offline
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rlcarey
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Galveston, TX
I agree, you are going to do nothing but encourage sloppy work and short cuts.
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#2101416 - 10/03/16 03:30 PM Re: Mortgage Loan Originator Compensation - turnaround morirse de risa
morirse de risa Offline
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Midwest
I do agree we would encourage short cuts, but it would be my job to make sure this doesn't happen.

Can someone explain "compensation on a proxy for the term of the loan"? We would only offer this incentive for our standard 15 or 30 year closed-end loan product.

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#2101423 - 10/03/16 03:54 PM Re: Mortgage Loan Originator Compensation - turnaround morirse de risa
JustKeepSwimming Offline
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Joined: Jun 2015
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Midwest
In my opinion, that could cause LOs to steer clients away from other products. So even though the incentive is technically not based on a term of the loan, the turn time is the "proxy" that could cause steering towards specific loan products.

Anyone else see it that way?
Last edited by JustKeepSwimming; 10/03/16 03:55 PM.
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#2101523 - 10/03/16 10:39 PM Re: Mortgage Loan Originator Compensation - turnaround morirse de risa
rlcarey Offline
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Galveston, TX
JKS - yes - steering might be another problem as the loan officers steer clients to the types of loans that close the quickest.
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#2111272 - 12/16/16 10:08 PM Re: Mortgage Loan Originator Compensation - turnaround morirse de risa
MB Guy Offline
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Way, way south.
So, other than it possibly being a bad idea in general, is there any regulatory prohibition from paying an MLO an incentive to close there loans in a shorter timeframe?

Senior management wants to clear up some loans in the pipeline before year end, so they want to offer LO's $100 per loan that can be closed by year end. Any violation of MLO rules? I didn't see anything specific that addressed this, but you can never be sure so I thought I'd ask here, thanks.
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#2111293 - 12/17/16 02:40 AM Re: Mortgage Loan Originator Compensation - turnaround morirse de risa
Inspector Offline
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Again this could be considered compensation on a proxy for the term of the loan. Loan officers would have an incentive to steer customers into whichever product would close the quickest so they could get the bonus. I would say it could be problematic based on what you have described. I can't point you to a specific part of the regulation that says this is prohibited outside of the proxy analysis.
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