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Rock Ridge
Flash in the pan


Joined: 24 Feb 2009
Posts: 44
Location: Dallas

Mortgage Loan Officer Compensation & Dept of Labor
PostPosted: Thu Aug 19, 2010 4:00 pm Reply with quoteBack to top

The DOL changed it's interpertation of how loan officers are compensated. Dependent on several factors it looks like you may have to pay overtime to loan officers.
The complete article is at this link.

http://www.lexology.com/librar.....ab23565d27

This should stir things up
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Rock Ridge
Flash in the pan


Joined: 24 Feb 2009
Posts: 44
Location: Dallas

Mortgage Loan Officer Compensation & Dept of Labor
PostPosted: Thu Aug 19, 2010 4:37 pm Reply with quoteBack to top

Sorry the link did not work.
Here is the text.

Patton Boggs LLP
Douglas B. Mishkin, John D. Socknat and Lindsey Weber

USA
April 9 2010
On March 24, 2010, the U.S. Department of Labor (DOL) announced a change in its interpretation of the federal law governing employee compensation that will dramatically affect the compensation of mortgage loan officers, whether they are employed by mortgage companies, state-chartered banks, federally-chartered banks, bank subsidiaries, savings and loan associations, credit unions, insurance companies or any other entity that makes or brokers mortgages.

Mortgage loan officers generally have been treated by their employers as exempt from the overtime requirements of the federal Fair Labor Standards Act (FLSA). In a Wage and Hour Opinion Letter issued in 2006, the U.S. Department of Labor (DOL) opined that mortgage loan officers satisfied the administrative exemption of the FLSA, and thus were not entitled to overtime pay (time-and-a-half) for hours worked in excess of 40 hours in a workweek. Now, in its first-ever Administrator’s Interpretation (AI), the DOL has found that mortgage loan officers do not satisfy the administrative exemption because the typical mortgage loan officer’s primary duty is to make sales, which is production, as opposed to administrative, work of their employers. The 2006 Opinion Letter is now “withdrawn.”

The AI does not have the force of law. But courts are likely to give it substantial deference in interpreting the FLSA in the inevitable overtime litigation to be brought by these employees. Furthermore, you may safely assume that the AI already is attracting the attention of mortgage loan officers – and of the lawyers seeking to represent them in lawsuits for unpaid overtime under the FLSA. As a result, every entity that employs mortgage loan officers, and every entity that has, or is considering taking, a significant economic interest in such a company in the United States – equity holders, warehouse lenders, secured lenders, etc. – has an economic interest in determining:

(1) whether the AI applies to that company’s mortgage loan officers;

(2) if the AI does apply, whether the company is in compliance with the DOL’s new position that these employees must receive overtime pay, and if not, what is the company’s potential liability;

(3) if the company is potentially liable, what defenses or other exemptions may be available to avoid that liability.

Who Is Covered By The AI?

The Duties Of A “Typical” Mortgage Loan Officer

Based on Wage and Hour Division investigations and facts established in judicial decisions addressing the status of mortgage loan officers under the FLSA, the Administrator found the following are the duties of a typical mortgage loan officer:

Mortgage loan officers receive internal leads and contact potential customers or receive contacts from customers generated by direct mail or other marketing activity. Mortgage loan officers collect required financial information from customers they contact or who contact them, including information about income, employment history, assets, investments, home ownership, debts, credit history, prior bankruptcies, judgments and liens. They also run credit reports. Mortgage loan officers may enter the collected financial information into a computer program that identifies which loan products may be offered to customers based on the financial information provided. They then assess the loan products identified and discuss with the customers the terms and conditions of particular loans, trying to match the customers’ needs with one of the company’s loan products. Mortgage loan officers also compile customer documents for forwarding to an underwriter or loan processor, and may finalize documents for closings.

To determine whether the administrative exemption applies, the Administrator asked “[w]hether the primary duty [of mortgage loan officers with such duties] . . . is office or non-manual work directly related to the management or general business operations of their employer or their employer’s customers.” If not, then the administrative exemption does not apply, and the mortgage loan officers must receive overtime pay when they work more than 40 hours in a workweek. Whether an employee is called a “mortgage loan officer” or something else is irrelevant; the issue is whether the employee performs the duties of what the DOL has identified as a typical mortgage loan officer.

These Typical Duties Are Primarily Making Sales, Not Administrative

After examining the relevant case law, the Administrator concluded that “the job duties mortgage loan officers typically perform leads [sic] to the conclusion that they have a primary duty of making sales.” The Administrator noted that mortgage loan officers often are trained in sales techniques, evaluated based on sales volume, and compensated primarily based on sales commissions. This conclusion that typical mortgage loan officers engage primarily in sales means that their “duties do not relate to the internal management or general business operation of the company,” and thus do not satisfy the “management of general business operations of their employer” requirement of the administrative exemption.

The Administrator also found that the duties of a typical mortgage loan officer do not relate primarily to the management or general business operations of “their employer’s customers.” The Administrator distinguished between customers who are “individuals seeking advice for their personal needs, such as people seeking mortgages for their homes” and those who seek advice about a business-related transaction, such as “a mortgage to purchase land for a new manufacturing plant.” Although the latter would qualify under the administrative exemption, the former does not.

Is The Company In Compliance With The AI, and What Is Its Potential Liability?

Whether mortgage loan officers are exempt or non-exempt depends upon their actual job responsibilities, not their job title. The company should examine the officers’ job descriptions, their employment agreements, if any, and any documents used in training these employees not only to determine the actual job responsibilities of these mortgage loan officers but also to assess whether the company will be able to prove that these are the actual job responsibilities, if challenged in court. Before doing any of this, the company should consider whether to involve a lawyer, either in-house or outside counsel, because all of the company’s internal communications, oral or written, about this topic can be subject to discovery in litigation unless they are protected by the attorney-client privilege.

If the company's mortgage loan officers are covered by the AI but are being treated as exempt (i.e., not being paid overtime), the company may be incurring an ongoing liability for unpaid overtime. The company may need to begin calculating and paying overtime under the federal FLSA to those officers working in excess of 40 hours in a workweek (under some state statutes, such as California’s, the overtime requirement kicks in after 8 hours in a workday). As part of such a change, the company must require affected mortgage loan officers to record their working time. This requirement would require these mortgage loan officers and their employers to determine: what is working time? Does it include a meal where the officer makes or receives a phone call? Or calls from the car to or from the office?

In addition, if during the last three years (the maximum statute of limitations under the FLSA), the company was not paying overtime to such mortgage loan officers (and cannot assert the defense that it was relying on the DOL opinion letter, see below), the company may be liable for up to three years of the unpaid overtime, plus possibly liquidated damages (doubling the amount of the overtime due) and attorney’s fees.

To get a sense of the possible magnitude of overtime liability, consider a mortgage loan officer who earned $90,000 while treated as exempt, i.e., with no overtime pay. That officer’s “regular rate of pay” -- $90,000 divided by 2080 hours (40 hours a week for 52 weeks) – is $43.26 per hour (“regular rate” may include other dollar amounts, but we’ll keep it simple for this example). If that officer worked an average of 50 hours a week (10 hours of overtime) for 50 weeks for three years, that officer is entitled to $64.90 an hour (1.5 the regular rate X $43.26) for 1500 hours, totaling $97,350.00. Add possible liquidated damages in an equal amount (another $97,350.00), plus attorney’s fees. Multiply these numbers by the number of the company’s mortgage loan officers, and you see how a seemingly minor compensation error quickly escalates into a significant financial liability.

What Defense Or Other Exemptions May Enable The Company To Avoid Liability

Reliance Upon DOL Opinion Letter

If the company has not been paying overtime to mortgage loan officers who, under the AI, should receive overtime, the company may be able to avoid liability for past unpaid overtime by asserting as a defense that it relied upon the 2006 opinion letters. To do so, the company will have to show that it actually knew about and relied upon the opinion letters. But proving this reliance may be more difficult than it would seem. In a case involving this very opinion letter, the court ruled that the company’s assertion that its understanding of the opinion letter was “confirmed” by its lawyer constituted a waiver of the attorney-client privilege. Henry v. Quicken Loans, 263 F.R.D. 458 (E.D. Mich. 2008).

Outside Sales Exemption

A mortgage loan officer whose work is primarily sales may qualify for the outside sales exemption under the federal FLSA. To qualify, the employee’s primary duty must be making sales and the employee must be “customarily and regularly engaged away from the employer’s place or places of business.”

There are at least two potential obstacles to asserting this exemption. First, asserting the outside sales exemption is inconsistent with asserting the administrative exemption, because asserting that the employee’s primary duty is making sales (outside sales) undercuts the argument that the employee’s primary duty is administrative as opposed to production (e.g. sales) work. Second, for state-licensed mortgage lenders and brokers, the concept of the “employer’s place of business” may be broader than in the past. Many states’ definition of “licensable activity” is expanding due in part to the definition of “mortgage loan originator” under state versions of the Secure and Fair Enforcement for Mortgage Licensing Act of 2008 (SAFE Act) and the general requirement that licensable activity occur only in a licensed location. For example, loan officers have historically spent time outside of their employer’s office at real estate offices and homebuilder sites attempting to generate business, including meeting with prospective borrowers, discussing or negotiating rates and terms, taking loan applications, etc. Arguably this activity must occur only at a licensed location, which potentially jeopardizes the ability to rely on the outside sales exemption as a place cannot be both a “licensed location” – which is part of the employee’s workplace – and “outside” the workplace for purposes of the outside sales exemption.

Highly Compensated Worker Exemption

Mortgage loan officers who earn more than $100,000 annually may qualify for the highly-compensated worker exemption if (1) the employee earns total annual compensation of $100,000 or more, including at least $455 per week on a salary basis; (2) the employee’s primary duty includes performing office or non-manual work, and (3) the employee customarily and regularly performs at least one of the exempt duties or responsibilities of an exempt executive, administrative or professional employee. The third factor is key. A mortgage loan officer who cannot satisfy the administrative exemption because his/her primary duties are sales may still be able to satisfy the highly compensated worker exemption by customarily and regularly performing at least one of the exempt responsibilities associated with the three main exemptions, even if that one is not the employee’s primary responsibility.

Professional Exemption?

Given the uniformity mandated for loan officer education and testing by the SAFE Act, the licensing and registration requirements of the SAFE Act may help bolster the argument that mortgage loan officers who are licensed and/or registered satisfy the professional exemption under the federal FLSA. Because the loan officer licensing provisions of state versions of the SAFE Act have been in effect in some states only since July 2009, and will not be fully effective in others until December 31, 2010, we are unaware of any judicial or administrative decisions addressing such an argument.

“Defenses” That Do Not Work

The issuance of the AI is an opportunity to remind employers in the mortgage industry of what does not qualify as a defense to FLSA liability. Here are three standard responses that do not work:

“We’ll just get out employees to waive their right to overtime.” Wrong. The FLSA does not permit an employee to waive the right to be paid overtime.
“We didn’t authorize that overtime, so we won’t pay it.” Wrong. The FLSA requires payment of overtime if the employer “suffered or permitted” the work to be done. In practical terms, this means if the employee worked the time, the employee must be paid. A company can (and should) have a policy requiring prior authorization before an employee works overtime, and can discipline (including terminate) an employee who violates that policy. But “discipline” does not mean “not pay.”
“We didn’t know the DOL opinion letter had been withdrawn, so we continued to rely on it.” Wrong. The withdrawal of the opinion letter makes it inoperative, whether or not an employer was aware of the withdrawal.
CONCLUSION

The DOL’s AI alters the landscape of mortgage loan officer compensation. In addition, it may have a ripple effect on others in the industry, such as loan processors and underwriters who already have been the subject of FLSA overtime litigation.

The company’s analysis of the AI, and any corresponding changes in policy, should be part of a coordinated, thoughtful response that is designed to minimize its risk of legal liability in a manner consistent with the company’s business objectives and culture.
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Felix
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Joined: 13 Sep 2007
Posts: 62

Re: Mortgage Loan Officer Compensation & Dept of Labor
PostPosted: Thu Aug 19, 2010 4:41 pm Reply with quoteBack to top

This was always true. The only way loan officers could be considered exempt from FLSA was if they generated their own leads.
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johnterry807
Dud?


Joined: 08 Jul 2011
Posts: 1

Re: Mortgage Loan Officer Compensation & Dept of Labor
PostPosted: Fri Jul 08, 2011 1:47 pm Reply with quoteBack to top

Hi,
I am also very interested in this subject, but the reference is very limited. You can share documents as well as experience? Thanks!

If you want to get more materials that related to this topic, you can visit: Sales admin job description
Best regards.
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barrymorgan88
Dud?


Joined: 07 Feb 2012
Posts: 3

Re: Mortgage Loan Officer Compensation & Dept of Labor
PostPosted: Tue Feb 07, 2012 10:13 am Reply with quoteBack to top

Wow, I have found this info very interesting because I am interested in getting a loan for bad credit... Thanks for the share Smile Always nice to get more informed about the world of debt collections.
Rock Ridge wrote:
The DOL changed it's interpertation of how loan officers are compensated. Dependent on several factors it looks like you may have to pay overtime to loan officers.
The complete article is at this link.

http://www.lexology.com/librar.....ab23565d27

This should stir things up


Last edited by barrymorgan88 on Sun Feb 12, 2012 6:24 pm; edited 1 time in total
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Emerald
Cherry Bomb


Joined: 12 Aug 2009
Posts: 179
Location: California

Re: Mortgage Loan Officer Compensation & Dept of Labor
PostPosted: Wed Feb 08, 2012 11:34 pm Reply with quoteBack to top

[quote="Rock Ridge"]Sorry the link did not work.
Here is the text.

Patton Boggs LLP
Douglas B. Mishkin, John D. Socknat and Lindsey Weber

USA
April 9 2010
On March 24, 2010, the U.S. Department of Labor (DOL) announced a change in its interpretation of the federal law governing employee compensation that will dramatically affect the compensation of mortgage loan officers, whether they are employed by mortgage companies, state-chartered banks, federally-chartered banks, bank subsidiaries, savings and loan associations, credit unions, insurance companies or any other entity that makes or brokers mortgages.


The overtime issue has been understood now as per the Lawsuits from TBW employees, Quicken Loans, and HSBC employees.

I'm hearing from several Account Reps that Companies are not following the W-2 rule for their loan officers but are in fact still paying them 1099 on their books regardless if loans are Lender paid or Borrower paid.

Anyone hearing if this is acceptable now? If so anyone have anything in writing?
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