The rule applies to “producing” branch manager compensation. To address the concern about the proliferation of “one person” branches to evade the rule, the Fed has said that the rule applies to “producing” branch managers. These managers will be treated as loan originators if they receive compensation as an originator on any loan. The Fed states: Managers (as well as administrative staff) … “who are employed by the creditor but do not arrange, negotiate, or otherwise obtain an extension of credit for a consumer, and whose compensation is not based on whether any particular loan is originated, are not loan originators.” (P. 99 - 100) The rule applies to mortgage brokerage firms in addition to loan originators The Fed states: “Accordingly, the term “mortgage broker” includes companies that engage in the activities described in § 226.36(a) and also includes employees of such companies that engage in these activities.” (P. 99) “A rule that covered only natural persons and not brokerage entities would permit evasion, for example, by individual loan originators incorporating as sole proprietorships.” (P. 33) The rule does not apply to loan servicing staff The Fed states: “The definition of “loan originator” does not apply to a loan servicer when the servicer modifies an existing loan on behalf of the current owner of the loan. The rule only applies to extensions of consumer credit and does not apply if a modification of an existing obligation’s terms does not constitute a refinancing under § 226.20(a)” (P. 99) 5.
What is compensation for loan originators?
The Fed states: “the term “compensation” includes salaries, commissions, and any financial or similar incentive provided to a loan originator that is based on any of the terms or conditions of the loan originator’s transactions.” (P. 101) (Emphasis added) “For example, the term “compensation” includes: A. An annual or other periodic bonus; or B. Awards of merchandise, services, trips, or similar prizes. ii. Name of fee. Compensation includes amounts the loan originator retains and is not dependent on the label or name of any fee imposed in connection with the transaction. For 7