CFPB Mortgage Loan Originator Compensation Rule Applied to Marketing Services Agreements

Last week, the Consumer Financial Protection Bureau (“CFPB”) extended the Mortgage Loan Originator Compensation Rule (the “Comp Rule”) to a marketing services agreement. You will recall that the CFPB assumed enforcement responsibility for the Comp Rule in July 2011 and subsequently revised the rule in connection with other mortgage-lending rulemaking.

In the Guarantee Mortgage Consent Order, the CFPB alleged that Guarantee paid loan originators partly based on the interest rates charged on loans they had originated. Guarantee funded the compensation by payments it made to marketing services entities owned by the company’s branch managers and other Guarantee loan originators. The originator-owners drew a portion of those payments/fees as compensation.

Accordingly, the CFPB alleged that branch managers received compensation based on the interest rates of the loans they originated in violation of the Comp Rule. (Order at ¶¶ 7-8.)  Guarantee was ordered to pay $228,000 in penalties, and its owners must personally tender the funds if necessary.

Mortgage lenders should continue to assess compensation arrangements, including affiliations and services agreements, to ensure compliance with the Comp Rule.

Should your organization have questions, please contact Spilman.

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By R. Scott Adams

R. Scott Adams

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