Mortgage Reform 2013-2014: What’s in store?bankersassurance.net/yahoo_site_admin/assets/docs/... · Takes a residential mortgage loan application; and Offers or negotiates terms
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9/26/2013
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BANKERS ASSURANCE COMPLIANCE CONFERENCE
LOAN ORIGINATOR COMPENSATION: 2014 SEPTEMBER 26, 2014
Serves about 850 financial institutions; 4700+ users
More than 18 years of experience in the financial services industry
A licensed attorney for more than 10 years, received Juris Doctorate from Northern Illinois University College of Law, and her Bachelor of Arts in General Studies degree from the University of Texas at Dallas with major in law and minor in business management
Nationally recognized speaker on banking compliance, including BSA/AML, offering real world stories to offer levity to very tough topics
An employee, agent, or contractor of the creditor or loan originator organization if the employee, agent, or contractor meets this definition
A creditor that engages in loan origination activities if creditor does not finance the transaction at consummation out of the creditor's own resources, including by drawing on a bona fide warehouse line of credit or out of deposits held by the creditor
All creditors that engage in loan origination activities are loan originators
Performs purely administrative or clerical tasks on behalf of a person who does engage in such activities
Does not take a consumer credit application or offer or negotiate credit terms available from a creditor,
A servicer or servicer's employees, agents, and contractors who offer or negotiate terms for purposes of
renegotiating, modifying, replacing, or subordinating principal of existing mortgages where consumers are behind in their payments, in default, or have a reasonable likelihood of defaulting or falling behind
Exception does not apply if offer or negotiate a transaction that constitutes a refinancing or obligates a different consumer on the existing debt
Other exceptions
Certain manufactured home retailer employees
Certain real estate brokerage firms, unless such person is compensated by creditor or loan originator or by any agent of such creditor or loan originator for a particular consumer credit transaction
i.e., any arrangement for the payment of non-deferred compensation that is determined with reference to the profits of the person from mortgage-related business), provided that:
Not directly or indirectly based on the terms of that individual loan originator's transactions; and
At least one of the following conditions is satisfied:
Compensation paid to an individual LO does not, in the aggregate, exceed 10% of his/her total compensation corresponding to the time period for which the compensation under the non-deferred profits-based compensation plan is paid; or
Individual LO was a LO for 10 or fewer transactions during the 12-month period preceding the date of compensation is determined
Any right or obligation of the parties to a credit transaction
Amount of credit extended is not a term of a transaction or a proxy for a term of a transaction
Provided that based on a fixed percentage of amount of credit extended
May be subject to a minimum or maximum dollar amount
“Based on” a term of a transaction
Does not require a comparison of multiple transactions or proof that any person subjectively intended that there be a relationship between the amount of the compensation paid and a transaction term
Determination is based on the objective facts and circumstances indicating that compensation would have been different if a transaction term had been different.
Generally, when there is a compensation policy in place and the objective facts and circumstances indicate the policy was followed, the determination of whether compensation would have been different if a transaction term had been different is made by analysis of the policy.
In the absence of a compensation policy, or when a compensation policy is not followed, the determination may be made based on a comparison of transactions originated and the amounts of compensation paid.
Assume that consumer A and consumer B receive loans from the same loan originator and the same creditor
Consumer A has a credit score of 650, and consumer B has a credit score of 800
Consumer A's loan has a 7% interest rate, and consumer B's loan has a 6.5% interest rate because of consumers' different credit scores
If creditor pays LO$1,500 for consumer A's loan and $1,000 for consumer B's loan because the creditor varies compensation payments in whole or in part with a consumer's credit score, LO’s compensation would be based on the transactions' terms or conditions
Payment amount fixed in advance for every loan LO arranges
e.g., $600 for every loan arranged for the creditor, or $1,000 for the first 1,000 loans arranged and $500 for each additional loan arranged
Cannot vary with the amount of credit extended
e.g., 1% of amount of credit extended for loans of $300,000 or more, 2% of amount of credit extended for loans between $200,000 and $300,000, and 3% of amount of credit extended for loans of $200,000 or less
Percentage of applications submitted by the LO to creditor that resulted in consummation
Quality of the loan originator's loan files
e.g., accuracy and completeness of the loan documentation
A strong foundation in compliance is perhaps the most important
building block of your institution, and TriNovus’ TriComply Services can
provide you with the resources you need to ease the burden in today’s
complex compliance environment. 25
• We’ll answer questions specific to your institution via our online Knowledgebase where you can also view questions and answers to issues other institutions are facing
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• Keep up-to-date with all the compliance deadlines by using the handy Compliance Calendar located in our TriComply Knowledgebase