The new setting “Use New Loan Originator Compensation Rule” indicates whether the Federal Reserve Board’s Loan Originator Compensation rule (effective April 1, 2011) applies to a given loan.
- Use New Loan Originator Compensation Rule will automatically be set to “Yes” for loans with an Application Date on or after April 1, 2011.
- If the indicator does not already have a value, Use New Loan Originator Compensation Rule will default to “Yes” on and after April 1, 2011 for all users who do not see the ConformX screens and are unable to be prompted for fields (aka “lights-out” users).
- In order to allow the user to apply the new rule as needed, Use New Loan Originator Compensation Rule will be prompted for on and after April 1, 2011 if it has not already been set. The new rule may still apply to loans with Application Dates before April 1, 2011 if the creditor does not receive the application until after that date.
- An institution can choose to have Use New Loan Originator Compensation Rule always be set to “Yes” by contacting Client Support.
Loan Originator/Broker Compensation Must Be Imported/Entered On Separate Fee Line
If Use New Loan Originator Compensation Rule is “Yes” the Yield Spread Premium can no longer be assumed to be the Loan Originator/Broker Compensation Amount. Therefore YSP will not be included as a charge in GFE 1/HUD-1 line 801. The “Include YSP as a Charge in 801″ setting will automatically be set to “No” for loans when Use New Loan Originator Compensation Rule is “Yes”.
Since the Yield Spread Premium will no longer be automatically used as the Loan Originator/Broker Compensation Amount, it is suggested that those clients with the phrase “Paid By Lender To Broker” in their “Description For Yield Spread Premium” in System Defaults have it removed. Then the term “Yield Spread Premium” (or other chosen text) will print as the fee description on the Itemization of Amount Financed and Closing Instructions for the YSP instead of “Yield Spread Premium Paid By Lender To Broker”.
The Yield Spread Premium will still automatically be included in GFE 2/HUD-1 line 802 regardless of how Use New Loan Originator Compensation Rule is set. Any Loan Originator/Broker Compensation will need to be imported (or entered on the Fee Screen in ConformX if necessary) on a fee line separate from the YSP.
Those who already have the Calculation Setting “Include YSP as a Charge in 801″ set to “No” in System Defaults will not see a change. The Yield Spread Premium will continue to only be included in GFE 2/HUD-1 line 802 for those clients.
Loan Originator/Broker Compensation Fee Line Designation
The new ConformX System Default “Fee Line on which Loan Originator/Broker Compensation was Imported” should be set for each client to indicate the HUD-1 fee line the Loan Originator/Broker Compensation will be sent on. This is especially important for lights-out institutions that are unable to fill in the Loan Originator/Broker Compensation fields manually.
Loan Originator/Broker Compensation Fields
Once the Fee Line on which Loan Originator/Broker Compensation was Imported has been set, the GFE Category for the line will be set to GFE 1/HUD-1 line 801 and several related fields will be filled in by ConformX using the fee information from that fee line:
- Loan Originator/Broker Compensation Paid by Borrower – dollar amount paid by the Borrower
- Loan Originator/Broker Compensation Paid by Lender – dollar amount paid by the Lender
- Loan Originator/Broker Compensation Paid by Seller – dollar amount paid by the Seller
- Loan Originator/Broker Compensation Paid by Broker – dollar amount paid by the Broker
- Loan Originator/Broker Compensation Paid by Branch – dollar amount paid by the Branch
- Loan Originator/Broker Compensation Paid by Other – dollar amount paid by some other party
- Loan Originator/Broker Compensation Amount – calculated in ConformX by totaling the compensation amounts paid by all parties
- Loan Originator/Broker Compensation Calculated Percent – calculated in ConformX by finding the Loan Originator/Broker Compensation Amount percent of Loan Amount
- Loan Originator/Broker Compensation Percent – can be passed to or entered into ConformX. If left unset, Loan Originator/Broker Compensation Calculated Percent will be used to fill this field.
If the Fee Line on which Loan Originator/Broker Compensation was Imported has not been set, the Loan Originator/Broker Compensation Paid By fields listed above will all be prompted for if none of them has a value and the Loan Originator/Broker Compensation Percent will be prompted for if it is empty as well.
Only Borrower -OR- Lender Can Pay Loan Originator/Broker Compensation
Under the new rule, if the Borrower pays compensation to the Loan Originator/Broker, the Lender cannot also pay the Loan Originator/Broker compensation. Pursuant to recent clarification from the Federal Reserve Board, payments to the Loan Originator/Broker by the Seller are considered to be on behalf of the Borrower.
If Loan Originator/Broker Compensation Paid By Borrower or Loan Originator/Broker Compensation Paid By Seller has a value; and Loan Originator/Broker Compensation Paid by Lender, Loan Originator/Broker Compensation Paid by Broker, Loan Originator/Broker Compensation Paid by Branch, or Loan Originator/Broker Compensation Paid by Other also has a value, a Data Integrity Error will fire:
Anti-Steering Safe Harbor
To facilitate compliance with the Anti-Steering prohibitions found in 12 CFR 226.36(e), the new Anti-Steering Disclosure of Loan Options will print by default in Initial Disclosure packages when Use New Loan Originator Compensation Rule is “Yes”. Fields to fill the three Loan Options (Lowest Rate, Lowest Rate With No Risky Features, and Lowest Orig./Disc. Pts.) for both Fixed Rate Mortgages and Adjustable Rate Mortgages will be prompted for in Initial Disclosures by default.
Only the Loan Options with the corresponding description filled in will print on the Anti-Steering Disclosure of Loan Options. If no Fixed Rate Loan Option description fields have values, the following will also print: “You have not expressed interest in any Fixed Interest Rate Loan Options.” If no Adjustable Rate Loan Option description fields have values, this will print: “You have not expressed interest in any Adjustable Interest Rate Loan Options.” If none of the Anti-Steering Loan Option descriptions are filled in, a Borrower Acknowledgement will trigger instead of a table of actual Loan Options. The Acknowledgement will state the Loan Originator filled the requirements by presenting Loan Options to the Borrower.
If the client decides they do not want to print the Anti-Steering Disclosure of Loan Options, the System Default under Document Settings can be changed accordingly.
Alternately, if the client decides they want to print the Anti-Steering Disclosure of Loan Options, but they always want to print the Acknowledgement and therefore don’t need the prompts for the fields in the table, there is a related Field Prompt Setting in System Defaults for that as well.
Users may decide they want the Anti-Steering Disclosure of Loan Options to print in another Document Package. Client Support may be contacted to customize when the document prints as well as when the Loan Option field prompts trigger. For instance, a client may choose to have the Anti-Steering Disclosure of Loan Options print in Initial Disclosures with the Loan Option tables filled in, but then have the Borrower Acknowledgment version of the form print in Closings. This would mean the user must still be prompted for the Anti-Steering Loan Option fields in Initial Disclosures, but not in Closings.
Related Document Edits
In addition to the creation of the Anti-Steering Disclosure of Loan Options (cx15546) discussed above, several other documents have been modified to print the Loan Originator Broker Compensation fields when Use New Loan Originator Compensation Rule is “Yes”.
The bulk of the related document edits are state disclosure forms that previously disclosed the Yield Spread Premium as the Loan Originator compensation amount. The Loan Originator/Broker Compensation fields will be used instead if Use New Loan Originator Compensation Rule is “Yes”. In addition, verbiage edits were made as needed on various state Broker and Loan Originator disclosure and agreement forms that previously displayed the Loan Originator compensation as possibly being paid by both the Borrower and the Lender on the same loan. A complete list of modified documents will be provided in the near future and will be included in the “March Doc Updates” link posted in the DocuTech April 2011 Newsletter.
The standard Closing Instructions (cx14225) have been modified to clearly label whether the loan is a “CONSUMER PAID TRANSACTION” or a “LENDER PAID TRANSACTION”. On the first page of the Closing Instructions before the Fee Details, if Use New Loan Originator Compensation Rule is “Yes” the following will print if Loan Originator/Broker Compensation Paid By Borrower or Loan Originator/Broker Compensation Paid By Seller has a value:
CONSUMER PAID TRANSACTION
No compensation is paid by the Lender. No party other than the Borrower may provide any compensation to the Loan Originator/Broker, directly or indirectly, in connection with this loan transaction.
If both Loan Originator/Broker Compensation Paid By Borrower and Loan Originator/Broker Compensation Paid By Seller are blank, but someone else has paid a Loan Originator/Broker Compensation Amount on the loan, the following will print instead:
LENDER PAID TRANSACTION
No compensation is to be paid to the Loan Originator/Broker by the Borrower.
The phrase “or by the Seller on behalf of the Borrower” will be added after the word “Borrower” for Purchase loans. A new area containing an “Itemization of 801. Origination Charge”, “Itemization of 802. Credit/Charge for the Interest Rate Chosen”, and “803. Total Adjusted Origination Charges” will print for all loans immediately below the “CONSUMER PAID TRANSACTION” or “LENDER PAID TRANSACTION” designation.
Download “Using the New Broker Compensation Letter (2011)” as a PDF Document.