Since the Consumer Financial Protection Bureau put out its final rule on loan officer compensation, many have been trying to figure out when an individual crosses the line into becoming an “originator” and thus all of the regulatory rules, liabilities and requirements apply.
Obviously, that is a detailed inquiry that has to be assessed on the facts of each case, but it appears one of the major lines of demarcation between origination and non-origination activities is linked to the initiation of any referral conversation. In other words, does the person in question initiate or make offers to refer others to lenders, or is a person merely responsive to a consumer’ request for such a referral. Carefully examining the new rules it appear that passive activity—where an individual merely provides general information or even contact information in response to a consumer’s request—will not amount to origination activities. However, when the individual is paid based upon obtaining referrals and initiates communications with the aim of referring consumers to a lender, such communication will most certainly render the individual an originator regardless of the specifics of what is ad is not mentioned in the conversation.
With respect to
“This exclusion from the definition of loan originator does not apply to non-producing managers who receive compensation based on particular transactions originated by other loan originators.”
Hence, if a non-producing manager receives compensation based upon the transactions originated in his/her branch, it renders the person an originator. What this means for non-producing branch managers is that to remain outside the ambit of “origination” activities, their compensation cannot be predicated on the loans originated by the branch they manage. As such, the days of the traditional so-called non-producing branch manager appear numbered.
