Loan Officer Paying an Assistant – NMP Skip to main content

Loan Officer Paying an Assistant

Joyce Pollison
Apr 17, 2014

Question: We are an FHA-approved lender with several branch officers. At one of our branches, a loan officer has an assistant, who is not licensed, but helps him close loans. The loan officer pays his assistant directly from his own compensation. Is this arrangement permissible? Answer: The arrangement described above is not permissible. A loan officer may not pay his assistant out of his own compensation; rather, the lender must bear this expense. HUD requires that a lender originating or servicing an FHA insured loan pay all of its own operating expenses. This requirement applies to the operating expenses of both the main and branch offices. “Operating expenses” is defined to include, without limitation, “equipment, furniture, office rent, overhead, employee compensation, and similar expenses”. (Emphasis added.) [HUD Handbook 4060.1 Rev-2, paragraph 2-8] HUD further underscores this requirement by stating: “A FHA approved mortgagee must pay all of its operating expenses including the compensation of all employees of its main and branch offices. Other operating expense that must be paid by the FHA approved mortgagee include, but are not limited to, equipment, furniture, office rent, utilities and other similar expenses incurred in operating a mortgage lending business. A branch compensation plan that includes the payment of operating expenses by the branch manager, any other employee or by a third party is a prohibited arrangement.” (Emphasis added.) [HUD Handbook 4060.1 Rev-2, paragraph 2-14B] Additionally, HUD requires the lender to have control over and responsibly supervise its branch employees. [HUD Handbook 4060.1 REV-2, para. 2-9] In the scenario described above, the assistant is not an employee of the lender, but rather an employee of the loan officer. As such, the lender cannot control or supervise the assistant’s activities, which is a violation of HUD requirements. In light of the foregoing, a Loan Officer employed by an FHA lender may not employ and directly compensate his own assistant. The assistant must be employed and compensated by the lender. However, the lender may be able to restructure the loan officer’s compensation arrangement so that ultimately she or he bears the cost of the assistant. Joyce Pollison is director of legal and regulatory compliance for Lenders Compliance Group. She may be reached by phone at (516) 442-3456.
Published
Apr 17, 2014
The Twelve Days of Renewals

The 2021 Renewal season brought no holiday joy to either regulator or industry users

Regulation and Compliance
Dec 07, 2021
CFPB Issues Final Rule To Facilitate Transition From LIBOR

The transition from LIBOR was set into motion after a criminal rate-setting conspiracy implicated large international banks and undermined public confidence in the index.

Regulation and Compliance
Dec 07, 2021
CFPB Alters Threshold For Exempting Loans From Special Appraisal Requirements

The 2022 threshold for exempting loans from special appraisal requirements for higher-priced mortgage loans will increase from $27,200 to $28,500. 

Regulation and Compliance
Dec 02, 2021
Regulatory Review, Reformatted

The progress made to date with NMLS modernization

Regulation and Compliance
Dec 01, 2021
November Surprise: Fed May Accelerate Tapering

Chairman Powell tells Congress of concerns about inflation, COVID-19 variant’s effect on recovery.

Regulation and Compliance
Dec 01, 2021
FHFA's 2022 Conforming Loan Limit Maxes Out At Nearly $1M

Baseline limit for Fannie, Freddie increases to $647,200, but for 'high-cost areas' loan ceiling set at $970,800 for single-family homes.

Regulation and Compliance
Dec 01, 2021