From the CFPB: Permissible methods of compensation. Compensation based on the following factors is not compensation based on a term of a transaction or a proxy for a term of a transaction:
A. The loan originator’s overall dollar volume (i.e., total dollar amount of credit extended – the Loan Amount – or total number of transactions originated), delivered to the creditor. See 1026.36 – Prohibited Acts or Practices – comment 36(d)(1)-9 discussing variations of compensation based on the amount of credit extended. Lender paid loans cannot be paid on splits of FEE INCOME. Basis points of funded loan amount only. Borrower paid can split commissions paid by borrower, but not include lender contributions from the back end. Comp can only come from one source or the other.
B. The long-term performance of the originator’s loans.
C. An hourly rate of pay to compensate the originator for the actual number of hours worked.
D. Whether the consumer is an existing customer of the creditor or a new customer.
E. A payment that is fixed in advance for every loan the originator arranges for the creditor (e.g., $600 for every credit transaction arranged for the creditor, or $1,000 for the first 1,000 credit transactions arranged and $500 for each additional credit transaction arranged).
F. The percentage of applications submitted by the loan originator to the creditor that results in consummated transactions.
G. The quality of the loan originator’s loan files (e.g., accuracy and completeness of the loan documentation) submitted to the creditor.
For those of you who did not live through the crash of 2009-2012, you should note that when production took a dive, audit activity and fines increased. Are you ready for an audit?
If not, call us.
Nelson A. Locke, Esq.