2013 Loan Originator Rule - Consumer Financial Protection Bureau

2013 Loan Originator Rule

Small Entity Compliance Guide

March 2015

Version Log

The Bureau updates this guide on a periodic basis to reflect finalized clarifications to the rule which impacts guide content, as well as administrative updates. Below is a version log noting the history of this document and its updates:

Date March 2015

January 2014

Version Rule Changes

2.2

Amendments to the 2013 Integrated Mortgage Disclosures Rule

under the Real EstateSettlement Procedures Act (Regulation X) and

the Truth In Lending Act (Regulation Z) and the 2013 Loan

Originator Rule under the Truth in Lending Act (Regulation Z) issued January 20th, 2015 provides for placement of the Nationwide

Mortgage Licensing System and Registry ID (NMLSR ID) on the

integrated disclosures that are required on or after August 1, 2015

2.1

Miscellaneous administrative changes

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November

2.0

2013

June 2013

1.0

Definition of "loan originator": Clarifies the definition of loan originator, including what constitutes assisting a consumer in applying for credit; defining "credit terms"; further describing administrative and clerical tasks; further describing loan processing activities such as coordination of the consummation of the credit transaction; and clarifying when an employee of a manufactured home retailer is not a loan originator. (See "Are you a loan originator" on pages 18-21.)

Non-Deferred Profits-Based Compensation Plans: Clarifies permissible compensation payable to a loan originator under a nondeferred profits-based compensation plan. (See "How can nondeferred profits-based compensation payments be made in compliance with the rule?" on page 48 and "How does the 10percent total compensation limit exception work" on pages 49.)

Financing Credit Insurance Premiums: Clarifies the prohibition on creditor financing of credit insurance premiums, including when a creditor "finances" a consumer's premium, and when the prohibition does not apply to premiums calculated and paid in full on a monthly basis. (See "What is the scope of the prohibition on financing credit insurance?" on pages 80)

Original Document

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Table of contents

Version Log .................................................................................................................2

Table of contents.........................................................................................................4

1. Introduction.........................................................................................................10 1.1 What is the purpose of this guide? ......................................................... 12 1.2 Who should read this guide? .................................................................. 13 1.3 Who can I contact about this guide or the rule? .................................... 14

2. Overview of the Loan Originator Rule ..............................................................15 2.1 What is the Loan Originator Rule about? ...............................................15 2.2 Who is covered by the rule ..................................................................... 16 2.3 When do I have to start following this rule? .......................................... 18 2.4 What loans does the rule cover? (? 1026.36(b)) .................................... 19

3. Are you a loan originator? (? 1026.36(a)(1)) .....................................................20 3.1 Can loan originators only be individuals?..............................................20 3.2 What actions make me a loan originator?.............................................. 21 3.3 When is a HUD-approved counselor a loan originator? (Comment 36(a)-1.v)) ............................................................................................... 25 3.4 When is a seller financer a loan originator? (? 1026.36(a)(4) and (5)). 26

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4. What does the rule say about compensation and fees? (? 1026.36(a)(3)) ....................................................................................................... 28

4.1 What counts as compensation? .............................................................. 28 4.2 Does the name of the fee matter? ........................................................... 28 4.3 Does compensation include fees that loan originators collect and pass

on to third parties? ................................................................................. 29 4.4 How does the rule treat payments for services other than loan

origination activities? .............................................................................30

5. How does the prohibition against compensation based on a transaction term work? (? 1026.36(d)(1))..........................................................33

5.1 What compensation based on transaction terms is prohibited? (? 1026.36(d)(1)(i)) ..................................................................................... 33

5.2 What is a transaction term? (? 1026.36(d)(1)(ii)).................................. 35 5.3 Is the amount of credit extended a transaction term? (?

1026.36(d)(1)(ii)).................................................................................... 36 5.4 How can the compensation policy be used to determine whether

compensation is based on a transaction term? (Comment 36(d)(1)-1.i)37 5.5 Can loan originator organizations receive compensation directly from a

consumer? Can they split compensation with an individual loan originator? (Comment 36(d)(1)-2).........................................................38 5.6 Does the rule prevent loan originators from receiving commissions for performing activities that are not loan origination activities? (? 1026.36(d)(1) and comment 36(a)-5.iv) ................................................ 39 5.7 How may loan originators increase or decrease their compensation in a particular transaction? (Comments 36(d)(1)-5 and -7) .........................40 5.8 Does the rule permit a loan originator to reduce its compensation to cover unexpected costs? (Comment 36(d)(1)-7) .................................... 41 5.9 May periodic changes be made in a compensation arrangement? (Comment 36(d)(1)-6)............................................................................ 41

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