Guide to the CFPB's Loan Originator Compensation Rule

Updated April 2016

The Consumer Financial Protection Bureau significantly changed the landscape for loan originator compensation with a final rule that took effect at the start of 2014. The rule clarified some areas left murky by previous compensation regulation, but it also broadened qualification standards and greatly expanded the definition of who is covered by its limits.

More than two years after the rule went into effect, lenders are still grappling with how to comply with it while still creating pay packages that entice and reward top producers. As they wrestle with the regulation, many lenders perceive that the competition is snatching up top performers by skirting the rules.

But the price of a miscalculation in how far the rule will stretch may be costlier than losing a high-producing loan originator to the competition. The CFPB, which has already unleashed a number of LO comp crackdowns with big-money penalties for companies and individuals, has indicated that it will spend a considerable amount of time scrutinizing LO compensation plans as part of its exams of supervised entities. And experts warn that some compensation strategies may also raise the risk of fair lending violations.

Inside Mortgage Finance’s Guide to the CFPB’s Loan Originator Compensation Rule, updated in April 2016, closely examines the bureau’s regulation, contrasts its differences with previous regulation, and discusses important compliance and enforcement concerns. You’ll learn who is covered, what is allowed, what you must do to make your program fit within the rule, and what you need to continually monitor.

Know who is covered, what is allowed, and how to make your program fit within the rule.


Partial Table of Contents

The CFPB’s LO Comp Rule

  • Loans Subject to the Rule
  • Definition of a Loan Originator
  • Referrals
  • Exclusions from the LO Comp Rule
  • Dual Compensation, Upfront Points and Fees
  • Proxies for Loan Terms
  • Non-Loan-Term Items
  • Profits-Based Compensation
  • Pick-A-Pay Plans
  • Pooled Compensation
  • Compensation for LOs that Work as a Team
  • Pricing Concessions
  • Point Banks
  • Competition for LOs
  • SAFE Act Requirements
  • Anti-Steering Provisions
  • Record Retention
  • QMs and Double Counting
  • TRID Disclosures

Differences Between The Fed’s Rule and the CFPB’s Rule

  • Single Transaction Versus Multiple Transactions
  • Loan Originator Paying for Unanticipated Cost Increases
  • Profit Sharing

Implementation and Enforcement of the CFPB’s Rule

  • LO Qualifications
  • Written Policies and Procedures
  • Non-Cash Compensation Incentives
  • Splitting Comp Between LOs
  • Bonuses and Retirement Plans
  • Bonuses Based on Volume
  • Non-Producing Managers and Sales Executives
  • Trends in Supervision by the CFPB
  • Loan-Level Analysis by the CFPB
  • Issues Related to the ATR Rule and QMs
  • Investor Requirements
  • Reverse Mortgages
  • Bond Loans

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