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#2032330 - 08/07/15 02:39 PM Charge back to LO for Early payoff
luvs2trvl Offline
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Texas
I cannot find anything cited in the regulations to address - so help please. Any comments are appreciated.

Our company sells all of our loans to investors in the secondary market. We have agreements in place that state if the loan pays off within a certain time frame (typically between 90 days and 6 months) that we(company) have to refund the premium the investor paid us when we sold the loan to them.

Just discovered that if this happens, the Loan officer is being charged back for 100% of the commission they received on the loan. Of course it's not in writing anywhere. From what I've read I believe this is not allowable - especially given the LO has no control if the borrower chooses to pay off their loan after the fact.

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Loan Originator Compensation Rule
#2032420 - 08/07/15 06:02 PM Re: Charge back to LO for Early payoff luvs2trvl
John Burnett Offline
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John Burnett
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Cape Cod
That sounds like a practice that would be a tempting target for a labor rights attorney.
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#2259285 - 09/05/21 05:06 AM Re: Charge back to LO for Early payoff luvs2trvl
Inspector Offline
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Revisiting this practice but looking at it specifically through the TILA LO Comp lenses. This seems like it would be prohibited under the rule but I am having some trouble with this compensation being based on the term or a proxy for the terms. That and the commentary says that compensation could consider the long term performance of the originators loans. I seem to recall something in the Fed's original commentary spelling out that this wasn't intended to mean it could be considered on a loan by loan basis but I don't see that mentioned anywhere in the current commentary.....although I may be missing it.

Regardless, I would be interested to hear others views on this and, if prohibited, how it fits into terms or proxies for terms?
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#2260945 - 10/08/21 04:41 PM Re: Charge back to LO for Early payoff luvs2trvl
lovelife Offline
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Well...my borrower just sold her house and i got a charge back even thought this coming 10/26/21 would be her 6 months frown
I think this should be a "class action" to lenders. If they are so afraid of being "Paid In Full" before 6 months, they should have make a "clause" in the disclosure for borrower to sign! why LO have to be penalized after all the work they went thru? I am taking this to further action.

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#2260952 - 10/08/21 05:43 PM Re: Charge back to LO for Early payoff luvs2trvl
lovelife Offline
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this is what i got from the lender AE:

Hi Janet,

I’m showing the borrower listed their home on 9/22. Fannie and Freddie are actually the ones who have this rule for loans paid off within 6 months regardless of the reason. Let me know if you have any further questions!

What do you guys think?

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#2260960 - 10/08/21 06:52 PM Re: Charge back to LO for Early payoff luvs2trvl
lovelife Offline
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Joined: Oct 2021
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i also asked the AE to send me the link that specifies the "chargeback" clause from the Freddie and Fannie...she sent me below link, but i don't see it.

https://selling-guide.fanniemae.com...C1-1-01-Execution-Options-08-05-2020.htm

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#2260981 - 10/08/21 10:14 PM Re: Charge back to LO for Early payoff luvs2trvl
rlcarey Offline
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Galveston, TX
Why - this happens all the time when dealing with automobile dealers and indirect paper?. The bank gets shafted on the deal, why not the lender too?
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#2260990 - 10/11/21 05:11 PM Re: Charge back to LO for Early payoff rlcarey
InFairness, CRCM Offline
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InFairness, CRCM
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Lender in this case is often a bank employee, who did the work regardless. Recouping commissions could lead to labor law issues.
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#2260992 - 10/11/21 05:46 PM Re: Charge back to LO for Early payoff luvs2trvl
rlcarey Offline
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Galveston, TX
All really depends on the compensation agreement.
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#2260993 - 10/11/21 05:50 PM Re: Charge back to LO for Early payoff rlcarey
InFairness, CRCM Offline
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InFairness, CRCM
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USA
Originally Posted by rlcarey
All really depends on the compensation agreement.

Very true. And I freely admit I'm a bit conservative (or gun shy) in this area after a large MLO compensation settlement at my institution a few years ago.
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