1. Fed Rule on Loan Originator Compensation
Fred Kreger, CMC - CAMP Vice-President of Government Affairs
Kenneth A. Jones, Esq., CAMP Government Affairs
Dr. Lesli McCollum Gooch, Potomac Partners DC

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3. Fed Rule on Loan Originator Compensation
-Background-
Rule Proposed on August 24, 2009.
CAMP’s concern with the amendment is with its intention to regulate loan
originator compensation by requiring compensation agreements between
lenders and loan originators.
This requirement as proposed would lead to:
• Increased consumer costs driven by reduced competition
• Fewer consumer choices
• Increased risk of improper steering
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4. Fed Rule on Loan Originator Compensation
-Background-
CAMP Advocated for the Following:
• Make rule apply to all originators
• Hold the proposed rule until the impact of the new GFE is adequately
measured
• Do not require compensation agreements
• Eliminate enforcement of rule through “after-the-fact” lawsuits
• Do not increase broker liability through unintended consequences
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5. Fed Rule on Loan Originator Compensation
-Overview of the Final Rule-
Final Rule released on August 16, 2010
Implementation Date: April 1, 2011
Consistent Compensation Agreement
• Who Must Have an Agreement?
• What Types of Compensation Formulas are Allowable?
• When Does the Agreement Need to be Used?
Anti-Steering and the Safe Harbor
Retail Producing Managers and Bonuses
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6. What is Compensation?
• Loan Originator
• Broker
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7. Who Must Have An Agreement?
A retail loan officer must have an agreement with their
employer (a creditor).
A wholesale loan officer must have an agreement with
their broker.
A broker must have an agreement with each of the lenders
(creditors) with which they do business.
No two agreements need be identical
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8. What Types of Compensation
Formulas are Allowable?
Compensation may not be related to any terms of
the loan except loan amount.
Approvable plans:
• Flat fee
• Hourly Rate
• Percentage of loan amount with optional floor and/or
ceiling
Notes:
• It is permissible to use a flat fee and % together.
• Agreements may be changed periodically to reflect
changing circumstances
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9. Quick Poll
Which best describes your current position?
• Retail Loan Officer (a creditor)
• Wholesale Loan Officer
• Wholesale Broker
• Retail Producing Manager
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10. When Does the Agreement Need to be
Used?
1. Wholesale Broker: Whenever compensation comes from any
source other than the consumer. If it comes from the consumer,
it must come 100% from the consumer.
2. Retail Loan Officer: Every time a retail loan officer receives
compensation.
3. Wholesale Loan Officer: TBD (It will be either 1 or 2 from
above.)
YSP is not considered consumer funds
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11. Anti-Steering Provision
The loan originator may not steer a
consumer to a loan where they
receive a higher compensation
unless the loan is in the consumer’s
best interest.
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12. Safe Harbor
For each type of transaction the borrower shows
interest, the loan originator must show loan
options from a significant number of creditors
that include:
• Loan with lowest simple interest rate.
• Loan with lowest discount and origination
fees (0 point loan).
• Loan with lowest simple interest rate that has
no exotic features.
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13. Retail Producing Managers and Bonuses
Any retail employee who is paid
compensation as a loan originator may
not receive any branch manager
compensation that is related to the profit
of the branch.
Explanation: to allow such would permit loan
originators to ultimately receive compensation
related to the terms of the loan.
Bonuses may be paid based on volume (UPB or
units), loan quality, etc. where not prohibited by
other state or federal laws.
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14. Quick Poll
How will this Rule affect your business?
This Fed Rule will:
• Significantly harm my business.
• Moderately harm my business.
• Have no impact on my business.
• Moderately help my business.
• Significantly help my business.
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15. We Can Make an Impact!
“I want to turn it around. I want us to stop getting
beat up. The best defense is a good offense.”
“Last year was a year of accomplishment as
CAMP created and implemented strategies to
keep the broker channel viable. The challenge
now, is maintaining the energy and funding to
do it all over again.”
-GA Chair, Fred Kreger, CMC
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18. Join the 200 Club
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