31 Hoosier Banker August 2014 1 12 CFR §1026.36(d)(1)(iv). 2 12 CFR §1026.36(f). 3 12 CFR §1026.36(h). 4 12 CFR §1026.36(i). 5 The Official Commentary to new 12 CFR §1026.36(d)(1)(iv) provides that a non-deferred profits based compensation plan is “any compensation agreement where an individual loan originator may be paid variable, additional compensation based in whole or in part on the mortgage-related profits of the person paying the compensation, any affiliate or a business unit within the organizational structure of the person or the affiliate, as applicable.” 6 The Rule prohibits for the first time the use of any factor that may be considered a “proxy” for the terms of a transaction. 7 12 CFR §1026.36(d)(1)(iv)(B)(1). 8 12 CFR §1026.36(d)(1)(iv)(B)(2). 9 Contributions to a “designated tax-advantaged plan” are not subject to the same restrictions as non-deferred compensation. 12 CFR §1026.36(d) (1)(iii) defines a “designated tax-advantaged plan” to mean: • A plan meeting the requirements of Internal Revenue Code section 401(a); • An employee annuity plan under Internal Revenue Code section 403(a); • A simple retirement account under Internal Revenue Code section 408(p); • A simplified employee pension under Internal Revenue Code section 408(k); • An annuity contract under Internal Revenue Code section 403(b); • An eligible deferred compensation plan under Internal Revenue Code section 457(b). 10 There are three main differences between the definitions of an originator in SAFE, as opposed to the New Originator Rules. First, any individual element under TILA, as amended by the Dodd-Frank Act, qualifies the person as a mortgage originator, while the SAFE Act requires that an individual must participate in both taking an application and in offering or negotiating terms to trigger the statute’s requirements. Second, the TILA definition of “mortgage originator” is separately triggered by assisting a consumer in obtaining or applying to obtain a loan, which is further defined under TILA to include, among other things, advising on terms, preparing loan packages or collecting information on behalf of the consumer, while the SAFE Act does not specifically reference this activity.Third, “mortgage originator” under TILA section 103(cc) (2)(B) further includes “any person who represents to the public through advertising or other means of communicating or providing information … that such person can or will provide any of the services or perform any of the activities” described in TILA section 103(cc)(2)(A). 11 12 CFR §1026.36(a)(1). 12 12 CFR §1026.36(f)(i) provides that LOs hired prior to Jan. 10, 2014, but for whom there were no applicable statutory or regulatory background standards in place at the time of hire or prior to the Jan. 10, 2014, date used to screen the individual, or for any LO who the Loan Originator Organization believes, based on reliable information known to them, likely does not meet the standards under 12 CFR §1026.36(f)(3)(ii), must submit the required information under 12 CFR §1026.36(f)(3)(i). 13 Licensed MLOs are already required to provide this information under Regulation G. 14 Previously disclosure of the NMLSR ID was required upon request, prior to acting as a mortgage loan originator; and through the initial written communication with a consumer. 15 In the event there is more than one LO for a transaction, the Official Commentary to 12 CFR §1026.36(g)(1)(ii)-1 provides that the person with primary responsibility for the transaction at the time the loan document is issued should be listed as the LO. 16 Pursuant to 12 CFR §1026.36(f)(i), the same approach should be used for assessing satisfaction of the financial responsibility, character and general fitness requirements for LOs hired before Jan. 1, 2014, for whom there were no applicable statutory or regulatory background standards in effect at the time of hire or before Jan. 1, 2014, used to screen the individual, and for any individual plans are identified and considered in the development of your compliance strategy. While the New Originator Rules can be cumbersome depending on your current compensation structure, with planning they can be navigated successfully. t regardless of when hired who, based on reliable information known to the loan originator organization, likely does not meet the standards under §1026.36(f)(3)(ii), before the individual acts as a loan originator in a consumer credit transaction secured by a dwelling. 17 Unlike other provisions of the New Originator Rule (with the exception of the provision prohibiting the financing of single premium credit insurance) the prohibition on arbitration clauses also applies to home equity lines of credit on a consumer’s principal dwelling. 1812 CFR §1026.36(h)(1). 19 12 CFR §1026.36 (h)(2). 20 12 CFR §1026.36(i)(2) defines credit insurance as “credit life, credit disability, credit unemployment, or credit property insurance, or any other accident, loss-of-income, life, or health insurance, or any payments directly or indirectly for any debt cancellation or suspension agreement or contract.” 21 Covered consumer transactions includes home equity lines of credit on a consumer’s principal dwelling. 22 Amendments to the 2013 Mortgage Rules under the Equal Credit Opportunity Act (Regulation B), Real Estate Settlement Procedures Act (Regulation X) and the Truth in Lending Act (Regulation Z). 23 12 CFR §1026.36(a). 24 Official Commentary to 12 CFR §1026.36(d) (1)-3.v.E. 1024 N Karwick Road • Michigan City 219.877.3500 • 888.649.8969 www.harbourtrust.com Whether you’ve just started thinking about a “nest egg,” are strategizing to meet college costs, looking ahead to your retirement, or concerned about your financial legacy, Harbour Trust & Investment Management Company is here for you. Whatever your life stage, let our trusted and proven experience, help ensure the secure future you deserve. Trust us to help you create a plan. • Trust Administration • Investment Management • Individual Retirement Accounts (IRAs) Call a member of our experienced team to assist with any of your financial and investment needs. make the most Trust us to help of your financial future Managing Your Wealth, Securing Your Future
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