[Angie Cowell]

Historically if we purchase leads (from Lending Tree, etc.) we have had a department of secondary market mortgage loan officers that specifically work these leads (these are the only loans they originate). We are wanting to discontinue that department and send these leads to our regular “boots on the ground” loan officers. If we do so, would it be permissible to pay the loan officers a smaller compensation amount for the loans closed that they received via leads from Lending Tree, etc.?

[rcooper]

Maybe… You still need to determine that the bank has ensured that the compensation does not provide for:
o Compensation based on a term of a transaction, other than that allowed by Sections 1026.36(d)(1)(iii), (iv) and Comment 36(d)(1)3.v.E.1;
o Payments by a person other than the consumer; and
o Steering based on the loan originator receiving greater compensation from the creditor in that transaction than in other transactions that could have been offered to the consumer.

I’m assuning you’ve already vetted the first bullet related to compensation on the terms of the transaction since these are existing lenders your familiar with that. Since you’re dealing with a mortgage broker, which qualifies as a LO, I think you need to pay close attention to the r the dual compensation prohibition (review the commenatary to 1026.36(d)(2)) and the prohibition on steering. See rules below. We have a anti-steering form (Loan Options Form) that might help you with this. If you have specific question after reviewing please let us know.

1026.36(e)
A transaction does not violate the steering prohibition if the consumer is presented with loan options that meet the conditions in paragraph (e)(3) of this section for each type of transaction in which the consumer expressed an interest. For purposes of paragraph (e) of this section, the term “type of transaction” refers to whether:

(i) A loan has an annual percentage rate that cannot increase after consummation;

(ii) A loan has an annual percentage rate that may increase after consummation; or

(iii) A loan is a reverse mortgage.

(3) Loan options presented. A transaction satisfies paragraph (e)(2) of this section only if the loan originator presents the loan options required by that paragraph and all of the following conditions are met:

(i) The loan originator must obtain loan options from a significant number of the creditors with which the originator regularly does business and, for each type of transaction in which the consumer expressed an interest, must present the consumer with loan options that include:

(A) The loan with the lowest interest rate;

(B) The loan with the lowest interest rate without negative amortization, a prepayment penalty, interest-only payments, a balloon payment in the first 7 years of the life of the loan, a demand feature, shared equity, or shared appreciation; or, in the case of a reverse mortgage, a loan without a prepayment penalty, or shared equity or shared appreciation; and

(C) The loan with the lowest total dollar amount of discount points, origination points or origination fees (or, if two or more loans have the same total dollar amount of discount points, origination points or origination fees, the loan with the lowest interest rate that has the lowest total dollar amount of discount points, origination points or origination fees).

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