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What is a Loan Officer Referral Policy?

Loan Officer Referral PolicyIn his weekly blog, “Compensation and Compliance Matters,” found on the National Mortgage News website, Offit Kurman financial compliance attorney Ari Karen recently discussed the importance of having a Loan Officer Referral Policy in place.

What is a Loan Officer Referral Policy?

These policies dictate the limited situations (if any) in which a loan officer or branch manager can refer loans to another loan officer within the same company. Why is this a big deal? Just think about the consequences such referrals could cause. If a branch manager had the ability to direct loans of varying degree to employees at different compensation levels, he/she could essentially steer the consumer by loan officer selection.

“Generally, this practice should be prohibited as it could lead to situations where the referral of deals back and forth circumvents the loan officer compensation rule,” explains Karen.  “Lenders should immediately put in place referral policies.”

Loan Officer Referral PolicyIf you have questions about implementing a Loan Officer Referral Policy is, please contact Mr. Karen at akaren@offitkurman.com. Mr. Karen is a principal of the firm in its labor and employment group and is also the Founder and Director of C3 Complaince Consultants, the firm’s subsidiary mortgage compliance consulting business.

Offit Kurman Financial Compliance Practice Group

The attorneys in our Financial Compliance Practice Group offer legal representation and counseling for commercial and corporate transactions, regulatory compliance, government enforcement, public policy and governmental affairs and litigation and arbitration. We continuously monitor legal developments, publish articles and participate in industry and bar association groups on consumer finance issues. In addition, we are active members of various national and local organizations involved in the consumer financial services industry.

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