An MLO receives a base salary plus a year-end bonus calculated as 0.1% of the total dollar volume of loans that successfully close without any post-closing compliance issues. Six months later, if a loan develops compliance problems, the MLO must return a proportional amount of the bonus. This arrangement:
Correct Answer
B) Is permitted because it encourages compliance and loan quality
Compensation structures that promote loan quality, compliance, and performance are permitted under Dodd-Frank. Clawback provisions tied to compliance issues are encouraged as they align MLO incentives with proper loan origination practices.
Why This Is the Correct Answer
Compensation structures that promote loan quality, compliance, and performance are permitted under Dodd-Frank. Clawback provisions tied to compliance issues are encouraged as they align MLO incentives with proper loan origination practices.
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Previous Question
A borrower qualifies for multiple loan products. The loan originator presents a 30-year fixed rate at 6.5% with $2,000 in points, a 30-year fixed rate at 7.0% with $500 in points, and a 5/1 ARM at 5.5% with $1,500 in points. Which category does the 5/1 ARM represent?
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An MLO receives compensation of $2,000 per loan plus an additional $300 if the borrower chooses to lock their rate for 60 days instead of 30 days. This compensation structure: