[TheBank]

My bank owns a mortgage company that makes secondary market loans. Bank employees are asked to refer customers to the subsidiary if a customer wants a long term fixed rate loan product we don’t offer. Employees earn $100/loan originated if they refer it. When the Reg Z Loan Orig Compensation rules become effective in Jan., will our non MLO/LO staff be considered LOs because of this referral payment? and therefore subject to the compensation limitations and qualifications rules?

The commentary says no, provided that the person does not discuss particular credit terms …. based on the consumer’s financial characteristics and does not direct the consumer, based on his or her assessment of the consumer’s financial characteristics, to a particular loan originator or particular creditor seeking to originate credit transactions to consumers with those financial characteristics…..

However would we be able to support employees would not know the consumer’s financial characteristics, i.e. does the very nature in this set up cause all referrals to be subject to the LO Compensation and any employee making the referral becomes a LO due to a referral? Any help is appreciated.

[aslauter]

We have a somewhat similar setup but ours relates to a 3rd party that assists us with secondary market originations. Requests for short term portfolio loans go to our inhouse mortgage area, requests for longer term fixed rate loans would go to an originator who sits in one of our lobbies but is actually employed by the third party that does our processing and then ultimately buys our loans for resale in the secondary market. This person is technically an employee of the third party – we have an agreement for them to perform origination work for us and they provide an LO to work with our customers. In reading through the reg it states that “an employee of a creditor or loan originator that provides an application form from a different entity or directs a consumer to a loan origintor employed by a differnt entity is a loan originator under the rule.” So I think we’re going to have to make sure our teller staff refers everyone to our inhouse mortgage area and then they decide where the loan should be worked.

[Author]

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