Loan Originator Compensation:
Past is Prologue - Part II  
Article - Excerpts
Regulatory Requirements
Restrictions on Upfront Fees




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You may be interested in reading my magazine article:Back
Loan Originator Compensation:
Past is Prologue - Part II      
It is published in the National Mortgage Professional Magazine.
(November 2012) Free Subscription to our Clients and Subscribers.

I have provided excerpts from the article and the download link.

In this article, the second in a two-part series, I explore the CFPB proposed rules in some depth, specifically the clarification of and expansion on existing regulations governing MLO compensation and qualifications.

These proposals clarify and expand existing regulations relating to loan originator compensation and qualifications.

They also promulgate new laws. The Proposals are meant to implement provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank) governing MLO compensation.

I hope you enjoy this article.

Please feel free to contact us at any time.

Jonathan Foxx
President and Managing Director 

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The proposed rules concern and include:

Restrictions on Upfront Points and/or Fees

Restrictions on Loan Originator Compensation

Loan Originator Qualification Requirements

I discuss the above-mentioned categories included in and affected by the CFPB's proposals. 

Afterward, I will provide certain considerations regarding the potential, effectuating outcomes inherent in their implementation.

Download Article-Square-Red (150x150)  

The proposal rules create a category, called the "zero-zero alternative" (Zero-Zero). It is a contrivance that must be tooled with prior to a lender or a mortgage broker being permitted to charge upfront points and/or fees. The Zero-Zero is an "alternative loan" with no upfront discount points, origination points, or fees that are retained by the lender, broker, or an affiliate of either.  The Zero-Zero would not be required if the consumer is unlikely to qualify for the Zero-Zero in the first place.

Using the Zero-Zero offers a safe harbor in the following scenarios:

*    Transactions involving a lender: A safe harbor is available if, any time prior to application for a loan containing upfront points and/or fees, the lender also provides a quote for a Zero-Zero.

*    Transactions involving a mortgage broker: A safe harbor is available under which lenders provide a mortgage broker with the pricing for that lender's Zero-Zero products.

In the mortgage broker scenario, consumers would be given quotes based on the Zero-Zero, as part of the available loan options.

Offering the Zero-Zero "quote" prior to taking an application essentially makes this metric into a creature that the CFPB has named, somewhat enigmatically, an "informal quote."

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