A loan officer has come to our Compliance team and asked us to approve a blanket commission split whereby, as part of their compensation, his new assistant will receive a portion of every commission the LO earns. When we asked what the assistant will be doing to earn the split, we received the following list of job functions:

-Checking the progress of appraisals, loan commitments and “clear to close” to make sure the loan moves forward as it should
-business development and strategy
-pipeline management
-helping with email
-helping to market LO to help get leads

I’ve reviewed the definition of “settlement services” under RESPA Section 8 (12 USC Sec. 2602(3)) and Reg. X (12 CFR 1024.2) and I don’t think this will work. The assistant’s job functions appear to be mostly administrative and do not fall under any of the categories of settlement services mentioned either in the statute or the regulation. Thus she would be receiving compensation for no work, which is prohibited under RESPA.

The LO has now gone over my head to the CEO saying my interpretation is “too conservative” and is pointing to the third category under the definition in Regulation X 12 CFR 1024.2 of "settlement service" -

(3) Provision of any services related to the origination, processing or funding of a federally related mortgage loan

Am I being too cautious here? Your thoughts are greatly appreciated.

I would look to the section below. At my last institution we had similar splits to LOAs and had the entire LO comp program reviewed by attorneys and FDIC examiners and neither of them raised this as an issue. Examiners did argue other points of the plan but they didn't question the split.

1024.14 (g) Fees, salaries, compensation, or other payments. (1) Section 8 of RESPA permits:
(iv) A payment to any person of a bona fide salary or compensation or other payment for goods or facilities actually furnished or for services actually performed;

Thanks for the response. We considered that section but could not find a definition of what "services" means, so we fell back on "settlement services" as mentioned in 1024.14(3) and 1024.2. I should also clarify something from my original post - the assistant will be receiving a salary as well as the split from all of the LO's deals. We originally told the LO to modify the assistant's salary to cover the job functions they will be handling.

And another thought - will other assistants be receiving the same compensation - or is this for this assistant only?

Skittles: For this assistant only...

How an employer decides to compensate their own employees is not a Section 8 issue. You would if anything need to be referring to LO compensation rules under Regulation Z.

I agree with rlcarey, I have also never seen an issue with a base plus type comp structure.

Checking the progress of appraisals, loan commitments and “clear to close” to make sure the loan moves forward as it should
-business development and strategy
-pipeline management
-helping with email
-helping to market LO to help get leads

Is this not the day to day job responsibility for this and the other MLO assistants? Why would you pay this assistant differently than the other assistants?

As Randy stated compensating the FI's own employees is not a Sec. 8 issue but it could be a Reg. Z issue.

"helping with email" - not sure what this would entail but if the assistant discusses any loan terms with the customer there is a very high likelihood they will be crossing the fine line into becoming a loan originator.

Thanks everyone! The Reg. Z comp issue is a good catch. I think we were blinded by the "No person shall give and no person shall accept...: language in Sec. 1024.14.

To address the concerns about possible MLO activites, this assistant (like all of our assistants) will be licensed in the states the LO covers so as to avoid any concerns about origination activities.