200 club webinar on the fed rule sept 29 2010

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200 club webinar on the fed rule sept 29 2010

  1. 1. Fed Rule on Loan Originator Compensation Fred Kreger, CMC - CAMP Vice-President of Government Affairs Kenneth A. Jones, Esq., CAMP Government Affairs Dr. Lesli McCollum Gooch, Potomac Partners DC
  2. 2. Welcome YOU’VE GOT QUESTIONS…WE’VE GOT ANSWERS. (BUT IF YOU CAN’T HEAR US…DIAL THE NUMBER ON YOUR INVITATION EMAIL OR DASHBOARD…OR CLICK ON USE MIC AND SPEAKERS AND LISTEN ON YOUR COMPUTER)
  3. 3. Fed Rule on Loan Originator Compensation -Background- Rule Proposed on August 24, 2009. CAMP’s concern with the amendment is with its intention to regulate loan originator compensation by requiring compensation agreements between lenders and loan originators. This requirement as proposed would lead to: • Increased consumer costs driven by reduced competition • Fewer consumer choices • Increased risk of improper steering 3
  4. 4. Fed Rule on Loan Originator Compensation -Background- CAMP Advocated for the Following: • Make rule apply to all originators • Hold the proposed rule until the impact of the new GFE is adequately measured • Do not require compensation agreements • Eliminate enforcement of rule through “after-the-fact” lawsuits • Do not increase broker liability through unintended consequences 4
  5. 5. Fed Rule on Loan Originator Compensation -Overview of the Final Rule- Final Rule released on August 16, 2010 Implementation Date: April 1, 2011 Consistent Compensation Agreement • Who Must Have an Agreement? • What Types of Compensation Formulas are Allowable? • When Does the Agreement Need to be Used? Anti-Steering and the Safe Harbor Retail Producing Managers and Bonuses 5
  6. 6. What is Compensation? • Loan Originator • Broker 6
  7. 7. Who Must Have An Agreement? A retail loan officer must have an agreement with their employer (a creditor). A wholesale loan officer must have an agreement with their broker. A broker must have an agreement with each of the lenders (creditors) with which they do business. No two agreements need be identical 7
  8. 8. What Types of Compensation Formulas are Allowable? Compensation may not be related to any terms of the loan except loan amount. Approvable plans: • Flat fee • Hourly Rate • Percentage of loan amount with optional floor and/or ceiling Notes: • It is permissible to use a flat fee and % together. • Agreements may be changed periodically to reflect changing circumstances 8
  9. 9. Quick Poll Which best describes your current position? • Retail Loan Officer (a creditor) • Wholesale Loan Officer • Wholesale Broker • Retail Producing Manager 9
  10. 10. When Does the Agreement Need to be Used? 1. Wholesale Broker: Whenever compensation comes from any source other than the consumer. If it comes from the consumer, it must come 100% from the consumer. 2. Retail Loan Officer: Every time a retail loan officer receives compensation. 3. Wholesale Loan Officer: TBD (It will be either 1 or 2 from above.) YSP is not considered consumer funds 10
  11. 11. Anti-Steering Provision The loan originator may not steer a consumer to a loan where they receive a higher compensation unless the loan is in the consumer’s best interest. 11
  12. 12. Safe Harbor For each type of transaction the borrower shows interest, the loan originator must show loan options from a significant number of creditors that include: • Loan with lowest simple interest rate. • Loan with lowest discount and origination fees (0 point loan). • Loan with lowest simple interest rate that has no exotic features. 12
  13. 13. Retail Producing Managers and Bonuses Any retail employee who is paid compensation as a loan originator may not receive any branch manager compensation that is related to the profit of the branch. Explanation: to allow such would permit loan originators to ultimately receive compensation related to the terms of the loan. Bonuses may be paid based on volume (UPB or units), loan quality, etc. where not prohibited by other state or federal laws. 13
  14. 14. Quick Poll How will this Rule affect your business? This Fed Rule will: • Significantly harm my business. • Moderately harm my business. • Have no impact on my business. • Moderately help my business. • Significantly help my business. 14
  15. 15. We Can Make an Impact! “I want to turn it around. I want us to stop getting beat up. The best defense is a good offense.” “Last year was a year of accomplishment as CAMP created and implemented strategies to keep the broker channel viable. The challenge now, is maintaining the energy and funding to do it all over again.” -GA Chair, Fred Kreger, CMC 15
  16. 16. Your Opportunity • Stay Informed • Read Legislative Updates • Follow CAMP on Facebook • Follow CAMP on Twitter CAMPlive 16
  17. 17. Join the 200 Club Exclusive group of individual mortgage professionals from around the country. Sole purpose is to educate and advocate to Federal legislators and regulators the true value that mortgage professionals and brokers bring to the table for consumers. 17
  18. 18. Join the 200 Club www.cambweb.org ga@ca-amp.org Recorded Webinars at www.go2comply.com 18

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