Department of Labor’s Reversal Requires Creative Approach to Compensation for Mortgage Loan Officers By Tim Watson and Barry Miller
Ellie Mae files registration statement for proposed IPO and is approved by Wells Fargo as a technology partner
NORTH CAROLINA MORTGAGE PROFESSIONAL MAGAZINE
Ellie Mae Inc. has announced that it has filed a registration statement on Form S-1 with the U.S. Securities & Exchange Commission (SEC) relating to a proposed initial public offering (IPO) of shares of its common stock. The number of shares to be offered and the price range for the offering have not yet been determined. The shares of common stock to be sold in this offering are proposed to be sold by Ellie Mae and certain stockholders. The underwriters of the offering will be Goldman, Sachs & Company; William Blair & Company, Keefe, Bruyette & Woods, Macquarie Capital, Piper Jaffray and ThinkEquity LLC. The offering will be made only by means of a prospectus. When available, a copy of the preliminary prospectus relating to the offering may be obtained from Goldman, Sachs & Company, 200 West Street, New York, NY 10282-2198 Attention: Prospectus Department. A registration statement relating to these shares of Ellie Mae common stock has been filed with the SEC but has not yet become effective. These shares may not be sold nor may offers to buy be accepted prior to the time the registration statement becomes effective. This press release shall not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale
of the shares of Ellie Mae’s common stock in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. Ellie Mae has also announced that Wells Fargo Funding has approved Encompass360, Ellie Mae’s mortgage management solution, for e-signing and e-delivery of disclosure documents. Users of Encompass360 can now meet Wells Fargo Funding submission requirements after not only electronically delivering disclosure documents to borrowers, but also having borrowers electronically upload, sign and deliver disclosures back to the lender via Ellie Mae’s WebCenter, a consumer portal that securely connects borrowers to their originator’s Encompass360 system. “Wells Fargo Funding’s correspondents are able to leverage Encompass360’s robust capacity for fully auditable, transparent and secure e-signing and e-delivery of disclosure documents,” says Jonathan Corr, chief strategy officer for Ellie Mae. “Encompass360 was created to provide the built-in ability to leverage the power and speed of the Internet, so all Wells Fargo Funding needed to do was provide its best-practice guidelines and requirements.” In order to comply with Wells Fargo Funding’s certification requirements, Ellie Mae made several adjustments to Encompass360’s e-signing process. For continued on page 21
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In addition to the many other new reg- the DOL does have the power to withulations in the finance industry, mort- draw its prior guidance regarding mortgage lenders now also find themselves gage loan officers, and there is little wrestling with an old employment doubt that employers now have less issue that until recently had been certainty regarding the exempt status resolved in their favor. On March 24, of the position than they did before the issued its Administrative 2010, the U.S. Department of Labor DOL (DOL) announced a drastic change in Interpretation. For that reason, many the agency’s views about how mort- employers in the mortgage lending industry that have taken gage loan officers must the DOL’s new position at be paid. During the prior face value, are beginning administration, the DOL to analyze how it will issued a number of opinaffect their employees. ion letters based on speIn considering whether cific facts finding that to shift loan officers to an mortgage loan officers overtime-eligible status, are exempt from federal employers first need to overtime pay requireassess the type of work that ments. In March, howevthe loan officers are doing. er, the DOL reversed The DOL’s Administrative these findings and rejectInterpretation leaves in tact ed the decades-old prac“The DOL does not a prior finding that loan offitice of issuing opinion cers may meet the “outside letters based on specific have the power to sales” exemption to federal factual circumstances. change federal law overtime pay requirements, if Instead, the DOL issued merely by issuing their jobs require that they a new “Administrative interpretive guidspend a significant portion Interpretation” making ance, and some of their working time the blanket statement employers may use engaged in sales and prothat mortgage loan offithe courts to chalmotional activities outside cers generally are not lenge the validity of of their employer’s office. exempt from federal overYet, in the modern business time pay requirements the DOL’s reversal in environment, face-to-face under the Administrative position.” meetings with clients and Exemption to overtime prospects have often been pay—the most common Tim Watson, Partner, Labor & Employment Department, replaced by phone calls, eexemption applied by Seyfarth Shaw LLP mails and text messages. employers to their mortFor that reason, many gage loan officers, in addition to many other similar posi- employers will find that their loan officers tions. While the interplay of the vari- spend much of their time working the ous federal overtime exemptions can phones, online and meeting with cusbe complicated, the bottom line to the tomers in a stationary office. Even those DOL’s new position is that many mort- lenders that have loan officers who spend gage loan officers who have long been a significant amount of their time in the paid on a salary plus commission basis field find themselves in an uncertain posinow arguably must be paid overtime tion because the exact amount of time pay for any hours in excess of the 40 that an employee must spend outside to that they work in a week.1 As a result, meet the exemption remains unclear. mortgage lenders are struggling to find Thus, many mortgage loan companies a way to reconcile the shift in the DOL’s have begun to consider reclassifying loan position with the realities of the lend- officers as non-exempt and eligible for overtime compensation. This raises a ing marketplace. The first challenge that employers number of legal and business issues that face is understanding the significance these employers must address in order to and impact of the DOL’s new ensure the continuing profitability of the Administrative Interpretation. The DOL loan officer position, while steering clear does not have the power to change fed- of prohibitions in other provisions of the eral law merely by issuing interpretive state and federal wage laws. Generally, an overtime-eligible guidance, and some employers may use the courts to challenge the validity of employee is paid overtime pay at onethe DOL’s reversal in position. However, and-a-half times his “regular hourly rate.” even if the DOL’s new view is vulneracontinued on page 12 ble to legal challenge, it is likely that
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