If you are a busy loan originator, then it is likely that you are considering the idea of hiring an assistant if you don’t already have one. Some loan officers have an unlicensed assistant, and the assistant is paid out of the compensation that the loan officer receives. Is this arrangement allowed?
The short answer is: NO, a loan officer is not allowed to pay the assistant from their own compensation. Instead, it is better for the lender to bear the expense of the assistant.
Why Does the Lender Need to Pay for the Assistant?
According to the HUD rules, it is a requirement that a lender who is either originating or servicing a loan with FHA mortgage insurance will need to pay all of their own operating expenses. These rules refer to every related operating expense, including those in both the branch offices and the main offices.
If you look at the HUD Handbook, you will see several references to these requirements. For example:
“A FHA approved mortgagee must pay all of its operating expenses including the compensation of all employees of its main and branch offices. Other operating expense that must be paid by the FHA approved mortgagee include, but are not limited to equipment, furniture, office rent, utilities and other similar expenses incurred in operating a mortgage lending business. A branch compensation plan that includes the payment of operating expenses by the branch manager, any other employee or by a third party is a prohibited arrangement.” (HUD Handbook 4060.1 Rev-2)
Another section of the HUD handbook refers to the operating expenses that must be paid, which includes things such as office rent, furniture, overhead costs, equipment, as well as employee compensation.
It is also important that the lender is responsible to oversee and supervise the employees at each branch. Technically, the assistant is employed by the lender and not the loan officer, which means that the lender needs to be monitoring the activities to make sure the assistant is staying compliant with everything.
So, because of this information, if a loan officer is employed by a FHA lender, then the loan officer may not hire and employ an assistant, or pay for their salary from their own compensation. Instead, the assistant needs to be paid and employed by the lender. If another arrangement is desired, then the compensation agreement of the loan officer may be restructured so that all parties are staying compliant with the rules.
We want to help you stay compliant with the rules and regulations of the mortgage industry. By accessing our information, you can learn everything that you need to know in order to stay ahead of the mortgage industry trends as well as the changes in the housing industry. DaveKevelighan.com helps provide you with easy access to information about mortgage programs. Learn more by looking through the details here on my website, or another option is to call me directly at (303) 520-0004.
