It's the topic that just won't go away. Over the last three weeks I spoke with five lenders who, in my opinion, are clearly violating the new LO comp regulations. The crazy part? They all honestly believe they're in full compliance. I can only imagine how many others are out there and then add those who know they're being aggressive and pushing the envelope. Here are some of my simple tests:
-Can sales offer premium pricing?
-Is premium pricing always used as a lender credit?
-Can sales charge origination fees?
If you answer Yes, No, Yes, you may have an issue. Hey, I understand there's nothing explicitly forbidding these practices but take about a red flag or better yet a smoking gun! All a regulator or auditor (whoever they may be) has to do is ask "Why?" And you know what, there's no sound response that won't convince them these policies are going to in some way compensate sales. Why else would an LO choose to sell higher rates and fees? We all know they aren't looking to make originations more challenging! And we all know the regulators are will be looking to levy fines right out of the gate.
There are countless plans which allow for corporate objectives and profit margins to be maintained, some are compliant and others not so much. Lenders out there better think hard and be careful.