Mortech Blog


Mortgage Industry Bits and Pieces

Posted by Tom Erickson on Oct 15, 2014 1:11:00 PM

FOMCFed Minutes


The Federal Open Market Committee (FOMC) released the minutes of their September meeting on October 8th.  As expected, they announced to end their market-friendly bond-buying program known as “quantitative” easing at the end of this month.  The Fed had been purchasing Treasuries and mortgage-backed securities to keep long term interest rates low.  And the Fed showed no inclination to raise the key Federal Funds Rate, currently near 0---the Fed stated that it plans to keep this rate at its current level for a “considerable amount of time” after ending quantitative easing. Janet Yellen, the Fed Chairman, stated a considerable amount of time could mean 6 months.


LO Comp Clarification


Can a Mortgage Loan Officer receive a different rate of compensation if the loan comes from a company referral source?


Regulation Z was enhanced through the Dodd-frank Act to restrict LO compensation based on transaction terms, such as interest rate, or a proxy for transaction terms.  A transaction term is any right or obligation of the parties to a credit transaction, except for the amount of the credit extended.  Therefore a referral source is not a term of the transaction.


A factor is a proxy for a transaction term if it meets the following 2 criteria:


  1. The factor consistently varies with transaction terms over a significant number of transactions, and
  2. The Loan Officer has the ability, directly or indirectly, to add, drop, or change the factor when originating the transaction.


Since a Loan Officer does not have the ability to influence the referral source---#2 of the proxy definition has not been met, therefore referral sources are not a term, nor a proxy for a term of the transaction and would be able to receive a different compensation structure.