It is my understanding that employees who are paid referral fees for referring potential customers to our mortgage department would qualify as “loan originators” under Reg Z. Because they just give general information, they would not qualify as a MLO, requiring NMLS registration. I also believe as LOs, we only have to do crimnal background checks,obtain a credit report, and do some Reg Z training about this. At this point the referral fees would not have to be included in the points and fees calculation. Is this correct?
You should review the Official Interpretations to Section 1026.35(a)(1) of Regulation Z, which clarify who is and who is not a loan originator. Just making a referral does not cause an employee to become a loan originator or a mortgage loan originator. Asking probing questions and then referring a customer to a specific originator makes an employee a loan originator.
You must obtain three forms of information for certain loan originators – a criminal background check, a credit report and answers to the NMLSR questions. You must also provide specific training, which is broader than just Regulation Z, based on the loan originators duties.
Compensation paid to a loan originator who is an employee of the creditor is not included in the total of points and fees.