Will your loan originator compensation plan pass muster?

Dust off your payroll records, loan originator compensation agreements and your accounting policies and procedures. The Consumer Financial Protection Bureau (CFPB) will be looking at these documents to determine if companies and individuals with managerial responsibility are violating the Loan Originator Compensation Rule that went into effect in April 2012.

The rule prohibits any person from paying a loan originator compensation, directly or indirectly, that is based on any of a loan transaction’s terms or conditions. Basically, it bans compensation that incentivizes a loan originator to steer customers into mortgage loans with less favorable terms, such as higher interest rates. This seems like old news, but after last week, a refresher is in order.

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Consumer Financial Protection Bureau, Fair Lending, Federal Regulatory