Loan merchants Struggle with Internal Rewrite on Loan Officer Compensation
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Mortgage companies struggle to review new rules from the Fed relating to caps on LO payment.
"It's going to make a lot of people restructure their mortgage divisions," according to Elizabeth Deal, executive v . p . of a mortgage subsidiary handled by the Independent Community Bankers of America.
Investors will have to rewrite the task descriptions of the loan officers and compensation packages, "which could really impact their way of life," she said.
The Federal reserve payment regulation allows loan merchants 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 a chance to access the secondary market. A lot of community banks pay their loan officers a base income with many LOs getting a bonus at yearend depending on their mortgage production volume."
Without doubt, this rule change doesn't affect a portion 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 may be much confusion in regards to the Federal reserve's payment rule amongst his affiliates."
They are apprehensive about possible limits on loan officer compensation," he said.
The Lenders One CEO pointed out that he advocates for 1 key function of the Fed law, which is to ban payment practices that encourage loan officers to steer customers into riskier and higher-priced loans, for example nonprime home loans that include teaser rates and prepayment penalty charges."
However, the rule should inspire loan officers to make a living depending on the amount of loans they originate and the amount borrowed, with no cap on income," he said. Stern believes this would allow the mortgage industry "to continue to recruit the most efficient and the smartest from the financial services world."
ABA senior regulatory lawyer Rod Alba said he is not attentive of any max on LO payment in the regulation.
The Federal reserve is "not setting the rate that is ultimately charged to the consumer," the ABA v . p . 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 compelling the mortgage market sector to adjust its loan originator compensation regulations.
Way back in Mar, the DOL sent an interruptive rule proclaiming that loan officers who work primarily inside the office are entitled to overtime pay.
The American Bankers Association regulatory counsel said it is not clear how the Federal reserve's compensation rule is going to interact with the Department of Labor's position on overtime pay.
"With the Federal reserve tightening up on compensation to LOs, and the businesses facing so much risk from the overtime rule," he said, the "pure commission-based payment system is probably a thing of the past."
The ABA v . p . mentioned that corporations may end up paying loan originators a set salary to work 9 to 5 and a bonus at the end of the year if they originated 100 mortgages.
The ICBA mortgage executive mentioned that LOs usually have numerous tasks at a community bank. They are salaried employees who will work overtime to help individuals. But that kind of flexibility might have to change under the overtime law.
In the meantime, loan officers that originate commercial real-estate loans are not affected by these compensation changes.
Article Source: Articlelogy.com
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