Life has a lot of confusion,
and there still seems to be some about lender (creditor) paid compensation
versus borrower (consumer) paid compensation. In fact, just yesterday I
received this note: "I currently work for a wholesale lender that offers
the full spectrum of loans. The new (interpretation of the) rule that
borrower paid compensation must equal lender paid compensation is causing my
brokers to lose out on jumbo loans since they cannot be competitive. Most
of my brokers have chosen a lender paid compensation level of one amount which
is fine for an average loan size in my area but is not on the occasional jumbo.
To be competitive they want to charge less by doing the loan as a
borrower paid transaction and either charging the lower amount or giving some
of their fee back as a broker credit so they net the lower amount. The lender I
work for will not allow that although there seem to be a number of different
interpretations of this in the market. If borrower paid comp must equal the
broker's chosen lender paid comp, can they still give a broker credit (when
going borrower paid) so they can net the lower fee and be competitive?"
To be blunt, the basic premise
of your question is incorrect. After a discussion that I had with two CFPB
officials yesterday, my view is that it appears that nowhere is it written
that consumer/borrower paid compensation may not be different than
lender/creditor paid compensation. Removing the double negative leads to
borrower paid compensation may be different than lender paid compensation. They
are not required by current regulations to be the same. Lenders may place
creditor paid compensation in one "bucket", and consumer paid in a
different bucket - that is at their discretion, but comparing
"buckets" is not required. There is no rule that says all
transactions must pay the LO the same amount/way. So yes, lenders may opt to
pay the same scale on every transaction, but it is not mandated by the
regulations. And thus the market may see different wholesalers paying different
amounts (wholesalers have the option to impose their own compensation rules, if
the prefer, as long as they don't go against the industry-wide rules).
In any discussion of this it is
important for everyone to remember that there are three things that are NOT
mandated by the rules put forth by the CFPB. The first is that creditor and
consumer paid compensation be the same. The second is that, between two
transactions, the LO must make the same amount of money. (The rule does not
prohibit it, but this turns on facts based on the terms of the loan, or any
proxy for the terms of the loan. The interpretations, of course, go to
differences between programs - these impact the terms of the loan. So we find
that the rule does not dictate that a lender can't pay different amounts on different
programs. But the reality of the situation is that programs contain
distinct requirements, and thus will probably have different loan terms.) The
third is that two originators be paid the same. (The CFPB's rule making does
not specify that two LOs in the same office be paid the same, but that all
applicable provisions, such as the LO comp rule, or Fair Lending, must be
adhered to.)
Father Norton woke up Sunday
morning and realizing, after a long period of terrible weather, it was an
exceptionally beautiful and sunny early spring day. He decided he just had to
play golf.
So he told the Associate Pastor
that he was feeling sick and persuaded him to say Mass for him that day.
As soon as the Associate Pastor
left the room, Father Norton headed out of town to a golf course about forty
miles away. This way he knew he wouldn't accidentally meet anyone he knew from
his parish.
Setting up on the first tee, he
was alone. After all, it was Sunday morning and everyone else was in church! At
about this time, Saint Peter leaned over to the Lord, while looking down from
the heavens and exclaimed, "You're not going to let him get away with
this, are you?"
The Lord sighed, and said,
"No, I guess not."
Just then Father Norton hit the
ball and it shot straight towards the pin, dropping just short of it, rolled up
and fell into the hole. IT WAS A 420 YARD HOLE IN ONE!
St. Peter was astonished. He
looked at the Lord and asked, "Why did you let him do that?"
The Lord smiled and replied,
"Who's he going to tell?"
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