30 Hoosier Banker August 2014 are not directly tied to their mortgage activities or for intermittent awards for specific mortgage-related performance, such as gift cards or vacation trips, all of which are generally required to be included in the calculation of the 10% Rule. What is and what is not included in the 10% Rule is an area of common misunderstanding. Many banks have various bonus plans for employees, in addition to supplemental bonus plans for their executives. Executive compensation plans take many forms, but the key consideration should always be whether or not the individual employee is considered an LO and, if so, whether compensation awarded to the individual is paid from mortgage-related business profits in excess of 10 percent of their total compensation corresponding to the time period for which the bonus compensation is paid. On this point, the Official Commentary to the New Originator Rule provides: “Compensation under a non-deferred profits-based compensation plan is not subject to the 10-percent total compensation limit under §1026.36(d)(1) (iv) if the non-deferred profits-based compensation plan is determined with reference only to profits from business other than mortgage-related business, as determined in accordance with generally accepted accounting principles.24” Practically, unless a bank segregates mortgage-related business profits from other bank income when calculating and awarding non-deferred compensation, non-deferred compensation of any kind to an employee who meets the definition of an LO must be considered for purposes of compliance with the 10% Rule. Strategies for Compliance Banks should review their existing LO job descriptions and carefully examine the activity of all employees to ensure they have accurately identified the scope of who is and who is not an LO under the New Originator Rule. After identifying all potential LOs, a review should be performed of all forms of compensation received by these individuals. Banks should be cautious to consider all forms of direct and indirect compensation that may be considered non-deferred, including bank-owned life insurance policies, stock grants, awards of merchandise or other miscellaneous items of value. Whether the compensation is received directly or indirectly from mortgage-related profits, unless it is clearly separated from mortgage-related profits in accordance with generally accepted accounting principles, it should be considered in calculating compliance with the 10% Rule. As with all regulatory compliance issues, policies and procedures are critical to ensure a consistent approach to compliance with the New Originator Rules. Involve your compliance officer and your chief human resources officer in the discussions early to ensure all bank employees and their respective compensation Continued from page 29. Fees & Refund Trends Report SNL Banker helps you target discounts to set stricter fee policies and protect margins. Focus on solutions Inconsistent fee policies chip away at your noninterest margin. IBA members: Learn how to preserve your noninterest margin and solve five other common banking challenges. Contact Julie Jones at 434.951.4419 or partners@SNL.com. › They help retain customers and build market share... ...but if they’re too big and indiscriminate, revenue can suffer. Waived fees and discounted rates are a double-edged sword:
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