The Branch Manager's Rate Bonus and the Realtor's Rent Check
You originate for a mid-sized lender and are paid a $28,000 base plus 75 basis points of the loan amount, on loans at any rate. Your branch manager proposes two changes he says will "keep the lights on": an extra 25 basis points whenever the borrower's note rate is at least 0.375% above the posted par rate, and a 1% origination fee paid to you directly by the borrower at closing while the lender continues to pay your 75 basis points. Separately, a realtor who referred 11 of your 26 loans last year offers desk space in her office for $2,000 per month; comparable space rents for about $450. The realtor's title affiliate, which is owned by her brother, sends you $250 per closed loan for "social media content" that you never produce, and the branch uses that title company on most files.
1. Analyze the proposed rate-based bonus under the loan originator compensation rule.
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The proposal is prohibited. Under 12 C.F.R. § 1026.36(d)(1), a loan originator's compensation may not be based on the terms of the transaction other than the loan amount; the safe harbor is a fixed percentage of the loan amount. A bonus paid only when the note rate exceeds par by 0.375% is compensation based on the interest rate, which is a transaction term. It is a per se violation, even if the borrower is fully disclosed and even if the rate is otherwise available to other borrowers.
The practical harm is steering: the incentive rewards you for placing borrowers in a more expensive loan, which is exactly the conflict the rule targets. The manager's framing that it is a "performance" or "volume" bonus does not matter; what matters is the trigger.
What you can accept: compensation based solely on the loan amount (basis points on every loan regardless of rate), a flat fee per loan, or a share of the company's overall profits that is not tied to the terms of the transactions you originate. What you must do: decline in writing, copy compliance, and keep the email. If the policy is actually implemented, you are exposed individually, and the lender is exposed to refund and penalty risk. Do not sign an acknowledgment of a policy you know is impermissible.
2. Analyze the borrower-paid 1% origination fee alongside the lender's 75 basis points.
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This is dual compensation and is impermissible unless the narrow conditions in § 1026.36(d)(2) are satisfied: the consumer pays the originator directly, the originator receives no compensation from the creditor for that transaction, and the charge is not based on transaction terms other than the loan amount. Here the lender is still paying 75 basis points, so the condition fails. You cannot take both.
There are additional problems. A fee paid directly by the borrower must be a bona fide charge for services, disclosed on the Loan Estimate and Closing Disclosure in the correct category, and it cannot be a device to increase pay while keeping the lender's price low. Adding a 1% fee at closing that was not disclosed earlier is also a disclosure problem and would generate a tolerance violation and a possible refund obligation.
The clean alternatives are to be paid entirely by the lender, or to be paid entirely by the consumer and not by the lender for that loan, chosen consistently and disclosed properly. If the manager insists on both, escalate to compliance and, if necessary, the regulator; compensation structure is not a gray area in which the originator should improvise.
3. Analyze the $2,000 rent and the $250 per-loan title payment, and set out what you do next.
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Rent. RESPA § 8(a) prohibits giving or accepting a thing of value in exchange for the referral of settlement service business. Section 8(c) creates a narrow exception for bona fide payments for goods, facilities, or services actually performed, and rent must be at fair market value. Paying $2,000 for space worth $450 pays $1,550 per month for the referral stream, and a realtor who sends 11 loans a year is precisely the referral source the statute targets. A lease alone does not cure it; examiners look at the delta, the timing, and whether the space is actually used.
Title payment. The $250 for content you never produce is a pure thing of value for referrals, and the title company is an affiliate of the referring realtor, so the arrangement also triggers affiliated business arrangement disclosure requirements: written disclosure of the affiliation, an estimate of the charge, and the consumer's freedom to choose another provider. The branch's routine use of that company makes the pattern worse, not better.
What you do. Decline both, in writing, and do not cash or accept either payment. Report the arrangements to compliance through the company's reporting channel, document your objection, and keep copies. Do not sign the lease or the marketing agreement. If the branch continues, expect RESPA exposure including treble damages, plus fair lending and UDAAP risk from a referral pattern tied to a single realtor's network. Your license and your individual liability are on the line, and "everyone does it" is not a defense.