The Mortgage Bankers Association wants the Federal Reserve to ease up on its compensation rules allowing production managers who originate loans to share in the profits of their branch office.
Fed staff maintains that branch managers who don't originate loans can be compensated based on profits, including the aggregate value of loans using secondary market prices or other metrics.
However, branch managers who originate loans cannot receive compensation based on loan terms -- such as the interest rate or loan product (FHA versus conventional), according to verbal discussions Fed staff have had with MBA officials.
MBA has summarized this verbal guidance in a Dec. 16 letter to the Fed in seeking written clarification on several issues, including managerial compensation.
The trade group is concerned the Fed believes branch managers cannot share in the profits if they originate even one loan. This means the manager has to be compensated like other loan originators -- based on a fixed percentage of all loans originated.
MBA contends the Fed's approach is too restrictive. And the trade group suggests an exemption should be made for managers who originate less than six loans.
If a manager originates less than six loans, MBA says, the Fed should take the position that "he or she is still treated as a managerial employee and is not subject to the restrictions of the rule regarding compensation."
