Loan companies Face Internal Rewrite on Loan Officer Payment
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Mortgage organizations scramble to review new rules from the Fed concerning caps on loan originator pay.
"It's going to make a lot of people restructure their home finance loan departments," according to Elizabeth Deal, executive vice president of a mortgage subsidiary controlled by the Independent Community Bankers of America.
Lenders will need to rewrite the task descriptions of the LOs and pay packages, "which could really impact their way of life," she said.
The Fed payment rule allows loan providers to pay a loan officer or mortgage broker a flat fee or a percentage of the loan.
Independent Community Bankers of America Mortgage provides community banks with usage of the secondary market. A couple of community banks pay their loan officers a base salary with numerous LOs benefiting from a bonus at yearend subject to their mortgage production volume."
Perhaps, this rule change doesn't affect a vast majority of our members," she said, "but it does affect some."
David Christensen, CEO of Christensen Financial, Inc, a mortgage net branch cooperative with over 200 member firms, said there does exist much confusion about the Federal reserve's payment law among his affiliates."
They are apprehensive about possible limits on loan officer compensation," he said.
The Lenders One CEO stressed that he supports a single key goal of the Fed rule, which is to ban payment practices that encourage loan officers to steer consumers into riskier and higher-priced loans, and this includes nonprime mortgages that contain teaser rates and prepayment fines."
However, the rule should empower loan officers to earn a living based mostly on the quantity of loans they produce and the amount borrowed, with no cap on income," he said. Stern believes this would allow the mortgage loan industry "to continue to recruit the most appropriate and the brightest from the financial services world."
ABA senior regulatory lawyer Rod Alba said he is not aware of any cap on LO payment in the regulation.
The Fed is "not setting the rate that is ultimately charged to the consumer," the American Bankers Association vice president said. And the Federal reserve is "not capping how much you can pay the broker or the LO," he added.
However, the Fed is not the only government entity pressuring the mortgage sector to adjust its loan officer payment guidelines.
Previously in March, the DOL issued an interruptive rule proclaiming that LOs who work primarily inside the office are entitled to overtime wages.
"It's unclear", says ABA regulatory counsel concerning how the new compensation rule from the FED will affect the DOL's overtime pay stance
"With the Fed tightening up on payment to LOs, and the firms facing so much risk from the overtime rule," he said, the "pure commission-based compensation system is without doubt a thing of the past."
The ABA v . p . suggested that companies may end up paying LOs a set salary to work 9 to 5 and a bonus at the end of the year if they originated 100 loans.
The Independent Community Bankers of America mortgage executive mentioned that LOs more often than not have many different tasks at a community bank. They are salaried employees who will work overtime to help consumers. But that kind of flexibility might have to change under the overtime regulation.
Meanwhile, loan officers that originate commercial real estate property loans are not affected by these compensation changes.
Article Source: Articlelogy.com
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