Loan Originator Compensation Plan Template - Anti Steering Compliance

The Loan Originator Compensation Rules represent some of the most arcane and risk-fraught pieces of the Dodd-Frank regulation for mortgage companies. Defining mortgage compensation plans presents a double edged challenge: you have to be competitive enough to retain talented, productive originators, yet you must also keep your structure in-line with any proxy or element that might cross the line. In addition, state regulators review compensation agreements against payroll records to ensure that companies adhere to their policies. For these reasons, your company's plans must continually evolve, but must also have the basic compliant framework to ensure that you do not accidentally break the rules.

Compensation "Plans" versus "Agreements"

A compensation "Plan" is a general description of how you compensate loan originators. This is very different from an employment agreement or compensation agreement, which defines each party's legal responsibilities. 

Compensation Plan

A compensation plan includes:

• Basis point payouts
• Volume drivers eg: units or dollar amount
• Transaction types e.g.; purchase vs refinance
• Lead generation distinctions; e.g. self -generated or company provided
• Borrower paid or lender paid

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Employment Agreement

An employment agreement stipulates:

• What the originator must do in his or her job - minimum duties
• When commissions will be paid
• Whether commissions will be paid after separation
• How the company will arbitrate for employee errors or malfeasance
• Circumstances for termination
• What expenses employees are responsible for or what is reimbursed

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In this context, you can see an employment agreement may reference a compensation plan, but it is not the same as a compensation plan. A company may have numerous compensation plans, and employees may be eligible for compensation under different plans and circumstances. A compensation plan may change from time to time, but an employment agreement normally stays in place. 

In addition, we recommend that you always have legal "Agreements" written or reviewed by duly licensed attorneys. If you are concerned that your compensation plan may be outside the requirements of the Loan Originator Compensation Rules, you may consult a compliance expert, but ultimately if any aspect of your plan is questionable, we recommend consulting an attorney specializing in Dodd-Frank rules. 

Free Sample Loan Officer Compensation Agreement

While you are free to use this agreement as a sample, please note that MortgageManuals.com is not a law firm, and this document has not been approved by an attorney for your use.  Complete Compensation Plan Samples are included in the Compliance Policies and Procedures Manual.