DOL Rules: Loan Officers Must be Paid Overtime

The Department of Labor late Wednesday declared that commissioned loan officers are entitled to overtime pay, reversing a 2006 ruling that favored the mortgage firms that employed them. If DOL's declaration stands, it could increase compensation costs for mortgage originators at a time when production volumes are beginning to decline thanks to rising loan rates and expiring tax credits. "If your primary job duty is to sell loans inside an office, then (under this ruling) you are entitled to overtime," said Rachhana Srey, a senior associate at the law firm of Nichols Kaster which represents LOs working for Quicken Loans and Rock Financial. The Quicken/Rock overtime case is scheduled for trial in June. (Nichols Kaster is based in Minneapolis, Quicken and Rock in Michigan.) In its brand new ruling, DOL found that a mortgage loan officer's primary duty is sales, which "falls squarely on the production side of the business." A DOL ruling in September 2006 requested by the Mortgage Bankers Association classified LOs as administrators, which are not entitled to overtime under the Fair Labor Standards Act. "We're obviously disappointed with the Labor Department's ruling," said MBA senior vice President Steve O'Connor. "It has been, and remains our contention that those who fall into the category of mortgage loan officers described in the opinion spend a majority of their time performing exempt administrative or executive duties; thus they should be exempt from FLSA coverage."