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Compensation Plan-Reg Z : 

Revised: 3/11/2011 Compensation Plan-Reg Z

Definitions in Final Rule : 

Definitions in Final Rule Loan Originator - a “loan originator” is any person who for compensation or other monetary gain arranges, negotiates, or otherwise obtains an extension of consumer credit for another person. Includes all loan officers regardless of which channel they are employed (e.g. broker, correspondent, or retail) Includes all “mortgage broker companies” which are not an employee of the creditor (e.g. table funded in investors name or own name). Excludes “creditors” that close in own name and fund its own resources (e.g. correspondent using bona fide warehouse line). Christensen Financial warehouse lines are considered bona fide for the purpose of this definition. Revised: 3/11/2011

Anti-Steering : 

Revised: 3/11/2011 Anti-Steering Loan Originators may not “steer” a borrower to a loan based on the receipt of more compensation, unless such a loan is in the borrowers best interest. A “Safe Harbor” exists if the loan originator presents the following loan options to the borrower for which they would likely qualify: Lowest Interest Rate – Lowest rate the borrower could possibly qualify for, pre-underwriting(i.e. discounted rate). Lowest Cost – Lowest point & origination fees. Lowest interest Rate without risky features - (e.g. negative amortization, prepayment penalty, balloon payments, etc.)

Compensation Restrictions : 

Revised: 3/11/2011 Compensation Restrictions Loan Originators cannot make compensation based on terms & conditions of the loan. Compensation includes: salaries, commissions, and any financial or similar incentive provided to the loan originator, as well as amounts the loan originator retains in connection with the transaction (e.g. processing fee paid to CFI Branch) Compensation does not include: payments for bona fide and reasonable third party charges (e.g. title, appraisal, credit report, CFI admin fee, etc.)

Correspondent Options : 

Revised: 3/11/2011 Correspondent Options Christensen Financial payments to Branch are unchanged!! Unrestricted SRP according to the rate selected CFI still must manage compensation paid to their loan officers according to the rule (i.e. treated as lender-paid formula on all transactions)

Bonus Compensation Restrictions : 

Revised: 3/11/2011 Bonus Compensation Restrictions Loan Originators cannot make compensation based on terms of the loan other than loan amount. Terms & conditions Restrictions include: interest rate, loan program, APR, LTV, prepayment penalty, etc. Terms & conditions Restrictions do not include: Quality of files(Customer survey) Loan performance Volume Pull Through One Touch (No Conditions, not including standard conditions) Christensen Financial can pay Branch Managers a bonus based on aggregate volume.

Brokers vs. CFI (Lender) Recap : 

Revised: 3/11/2011 Brokers vs. CFI (Lender) Recap

Timeline : 

Revised: 3/11/2011 Timeline Dodd-Frank provisions not covered in the Reg Z Final LO Comp Rule will be implemented in future rule making by the Fed and/or the CFPB (Consumer Financial Protection Bureau) no later than 12/21/12 (18 months after the CFPB transfer date of 7/21/11).

Summary of Final Rule : 

Revised: 3/11/2011 Summary of Final Rule Loan Originator compensation cannot vary based on the terms or conditions of the loan, other than loan amount. Loan Originator compensation can be paid by either the borrower or third party(e.g. creditor), but not a combination of both. Loan Originators cannot steer a borrower into a loan not in their interest based on the fact the loan originator will receive greater compensation.

Maximum Charges : 

Revised: 3/11/2011 Maximum Charges FHA loans : Origination (box 1 of the Good Faith Estimate) can be as high as 4%. This includes all line items in the 800 section of the Good Faith Estimate except for the appraisal and credit report. The Service Release Premium is 4% maximum. VA loans: Only 1% Origination is allowed on the GFE. Seller can contribute to borrower closing costs not to exceed 4% of the loan amount, but none of the seller contribution can be used toward loan originator compensation. The Service Release Premium is 4% maximum. Conventional Fixed Rate and Government ARM loans: Origination fees can be as high as 3%. The Service Release Premium is 3% maximum. Conforming ARMS: Origination fees can be as high as 2%. The Service Release Premium is 2% maximum.

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Revised: 3/11/2011 If you have any questions please contact or call 866-869-0008

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