[Anonymous]

Isn’t a compensation program in violation with Reg Z if set up to pay referral fees for mortgage loans using the following:

Loan amt Referral Fee
50,000 to 99,999 $10
100,000 to 499,999 $15
500,000 and above $20

[JGo9]

Ashleigh,

Comment 36(d)(1)-(3) is the only section of the regulation that talks about what are acceptable forms of compensation. For complete assurance that a compensation structure is OK you would need to pick on of the options they’ve listed. Otherwise you will be at the mercy of your regulators.

I found the below informaiton from the Federal Reserve: https://edocket.access.gpo.gov/2010/pdf/2010-22161.pdf

3. Examples of compensation not based on transaction terms or conditions. The following are only illustrative examples of compensation methods that are permissible (unless otherwise prohibited by applicable law), and not an exhaustive list. Compensation is not based on the transaction’s terms or conditions if it is based on, for example:
i. The loan originator’s overall loan volume (i.e., total dollar amount of credit extended or total number of loans originated), delivered to the creditor.
ii. The long-term performance of the originator’s loans.
iii. An hourly rate of pay to compensate the originator for the actual number of hours worked.
iv. Whether the consumer is an existing customer of the creditor or a new customer.
v. A payment that is fixed in advance for every loan the originator arranges for the creditor (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).
vi. The percentage of applications submitted by the loan originator to the creditor that result in consummated transactions.
vii. The quality of the loan originator’s loan files (e.g., accuracy and completeness of the loan documentation) submitted to the
creditor.
viii. A legitimate business expense, such as fixed overhead costs.
ix. Compensation that is based on the amount of credit extended, as permitted by § 226.36(d)(1)(ii). See comment 36(d)(1)–9
discussing compensation based on the amount of credit extended.

I hope this helps.

[Author]

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