1. Effective on applications received on or after April 1, 2011 a loan originator (LO) cannot receive compensation that is based on the terms or conditions of the loan. This includes interest rate, product type, etc. The only exception is compensation based on a percentage of the loan amount. 2. Both mortgage broker companies and loan originators working for mortgage broker companies are considered loan originators (LOs) under the rule. Thus a brokerage has to meet the same requirements as an individual originator and lenders must treat them as such. Either category is hereto referred to as LO. 3. If the LO receives their compensation directly from the consumer (paid at closing or financed into the loan) in a wholesale transaction, the LO may negotiate those fees with the consumer and the fees may vary from transaction to transaction. Therefore, it will be more advantageous for LOs to structure their deals with the consumer paying the origination fees. In these transactions, a lender credit (YSP) may still be present but must be applied to all other closing costs such that the closing costs are sufficient to use up the entire YSP credit and there is no cash back to the consumer or surplus YSP paid to the LO. 4. If the LO receives compensation directly from the consumer (paid at closing or financed into the loan), the LO may not receive any additional compensation directly or indirectly from any other person, including the lender, in connection with that transaction. LOs may not receive both consumer paid origination fees and lender credits (YSP) on the same transaction. Any lender credit (YSP) must be applied to closing costs other than the origination fees as outlined in #3 above. 5. The LO and consumer may agree to have the LO origination fees paid through a lender credit (YSP). In those instances, the LO (brokerage company) must contractually agree with the lender in advance to the amount of compensation they want to earn on all transactions they conduct with that lender on which they are paid by lender credit. (This can be adjusted/reviewed periodically.) The origination fees in a lender paid wholesale transaction include all broker fees including processing, broker administration, etc. Bona Fide third party charges are not included in the LO origination fees. On wholesale transactions where a broker is being contractually paid by a pre-determined lender credit, their origination fees cannot be raised or lowered on a specific transaction by the originator or the lender for any reason. Surplus YSP may exist (over and above the contractually pre-determined amount) but must be applied to other closing costs. This will preclude LOs from paying for borrower fee's such as appraisal, or extension fees or reducing their origination charges for competitive reasons in cases where their compensation is being derived from a lender credit. It will also preclude LOs from earning any lender credit greater than the contractually pre-determined amount. 6. LOs are prohibited from steering consumers to any residential mortgage loan wherein the LO will receive greater compensation from that loan than they would from another loan, unless the consummated loan transaction is documented to be in the consumer's best interest. The LO in a wholesale transaction must meet a safe harbor requirement which gives the consumer three examples from lenders that the LO normally does business with. The examples must represent loans the LO has determined the consumer is qualified for and will include the lowest rate option and the lowest fee option. The consumer does not have to choose the option with the lowest rate or fees, but a justification for the choice must be documented, such as quicker turn times, underwriting criteria, etc. 7. We will utilize the closing instructions and the estimated HUD-1 prior to docs to verify whether the origination fees are consumer paid (paid at closing or financed into the loan), or lender paid (paid from YSP). We will not rely on the GFE or doc request for this information. | 
