Opinion

Attention to Brokered, Banked Comp Distinctions Intensifying

As January nears residential mortgage lenders are paying increased attention to any distinctions in compensation among different mortgage loans. One area where many banks maintain a difference is in brokered vs. self-funded mortgage loans.

Determining whether a lender can maintain a distinction is an individuated analysis focusing on the nature of the mortgage loan products offered in the brokered and banked loan channels. In the event that the brokered products are viable alternatives for borrowers and could essentially compete against self-funded alternatives, maintaining a compensation distinction is very risky. This is especially true where the brokered products have lower pricing and the compensation is reduced from self-funded loans. On the other hand, where the brokered mortgage loan products involve scenarios that legitimately cannot and would not be available under any alternative offered through self-funded mortgage loan programs a distinction may be permissible. For instance, if a bank had no loan programs below a 700 Fair Isaac & Co. credit score and only those borrowers were permitted to submit through a brokered channel, then a properly documented compensation distinction may be permissible.

The bottom line is the banked vs. brokered compensation question has to be answered in reference to the particular financial institution.

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Law and regulation
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