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CU Compliance Connection. CFPB Loan Originator Compensation . CFPB Loan Originator Compensation. Congress reformed loan originator practices due to the mortgage crisis and recession through the Dodd-Frank Act.

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CU Compliance Connection

CFPB Loan Originator Compensation

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CFPB Loan Originator Compensation

  • Congress reformed loan originator practices due to the mortgage crisis and recession through the Dodd-Frank Act.
  • The CFPB’s new Loan Originator Compensation Rules go into effect on January 10, 2014.
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CFPB Loan Originator Compensation

  • Compensation
    • Prohibited form basing a LO’s compensation on “any of the transaction’s terms or conditions.”
      • Compensation includes salaries, commissions, and any financial or similar incentive.
      • Compensation based on interest rate, annual percentage rate, collateral type, or the existence of a prepayment penalty, among other things is prohibited.
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CFPB Loan Originator Compensation

  • Compensation
    • Prohibits:
      • Compensation based on a proxy.
      • Reducing compensation to offset the cost of a change of transaction terms.
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CFPB Loan Originator Compensation

  • Dual Compensation
    • When a mortgage loan originator receives compensation directly from a member in connection with a mortgage loan they are not allowed to receive compensation from any other person or organization in connection with the transaction.
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CFPB Loan Originator Compensation

  • Compensation – Non-Deferred Profit Based Plans
    • Allowed as long as:
      • Compensation is not directly or indirectly based on the terms of the originators transactions; and
      • Aggregate compensation for the period does not exceed 10% of the originators total compensations; or
      • Originator closed 10 or fewer transactions in the 12 months prior to the date the compensation is determined.
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CFPB Loan Originator Compensation

  • Licensing & Registration
    • Follow S.A.F.E. Act guidance
    • Comply with:
      • State laws and licensing requirements; or
      • Federal laws and licensing requirements.
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CFPB Loan Originator Compensation

  • Training
    • Periodic Training is required that is sufficient in frequency, timing, duration and content to ensure that loan originators have the knowledge of state and federal regulatory requirements that apply to the employee’s loan originator activities.
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CFPB Loan Originator Compensation

  • ID Requirements
    • Covered loan documents must include:
      • Credit Union name and NMLS or state registry organizational ID
      • Loan originators name and NMLS or state registry ID
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Thank you for joining me for this overview of the CFPB’s Loan Originator Compensation Rules.

Stay Tuned……..

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