Lenders should immediately put in place referral policies. These are policies that dictate the limited situations (if any) in which a loan officer or branch manager can refer loans to another loan officer within the company. Generally, this practice should be prohibited as it could lead to situations where the referral of deals back and forth circumvents the LO compensation rule. For example, if a branch manager had 10 employees at different compensation levels he could direct the loan to an originator based upon his assessment of the ability to price the consumer and the applicable compensation level of the loan officer to whom the referral is made. In other words, the branch manager could refer potential FHA loans to a high commission loan officer and direct the conventional loans to a lower commissioned employee, effectively steering the consumer by loan officer selection.
Yet, there are valid circumstances where referrals could be permitted. For instance, if a loan officer is not licensed in a state where the company has operations, he could refer such a loan to a licensed LO working for the company in that state. Even then, however, one would want to tightly control the referral. For instance, the referral would need to go through corporate headquarters, any compensation would need to be a flat dollar amount set in advance, and the referring loan officer would be precluded from performing any service on the file. In essence, prophylactic measures would need to prevent loan officers from negotiating deals leading to unlicensed work by the referring loan officer. As with all policies, these should be put in writing and disseminated company-wide.