De Mager, common (illegal?) 1099 LO Machine
Proponents of the 1099 rule say that 1) allow different states; and 2) Federal rules allow this in some circumstances. Regulation Z Section 36 (F) (2) states that a mortgage brokerage is “responsible for verifying that the persons of the loan who work directly have a permit and registered in accordance with the applicable legislation, Whether the individual loan -originators are their employees or independent contractors They operate on the basis of a brokerage agreement. “
I realize that we are getting a bit heavy in Legalese. Here is how the mortgage manager described his Real Problem with the rise of 1099 loose:
“The mentality is:” I’m just going to pay on split and I’m going to do an 80. “They actually recruit videos and recruitment interviews.
He continued: “No matter how much you can sell, you get a percentage of that. So now you have an incentive to get as much as possible if you can. Because you are now 80% of everything you can generate. So if you are dealing with a customer who is not Savvy, you can drop a Savvy, but you can be a dousy, but you can be there.”
A producer of $ 40 million a year who has their own 1099 company and ‘is paid for production’ can receive 250 bps per loan, he said. Of course the LO will have to bear the most costs by paying their own LOA/processor, doing all marketing, eating credit report costs and more. The brokerage lasts 20%, but, according to the source, really only offers access to system (in most cases), approvals of investors and AMC access. It is not much work on their part, he said.
“Many broker shops, knowing that they do not run the risk of attention from supervisors, throw caution for the wind; bringing back all those old practices that struggled the reputation of this industry so many years ago,” he said. “A common attitude at the moment is that a brokerage shop is recruited to be established as an external contractor (1099), (sorry to say but …) Pay reference costs (recoil) to the broker who has sent the loan their way, and then a predetermined percentage (split) of the loan that a loan generates.”
Flavia Furlan Nunes and I have done a few functions about LO COM problems in the past year, and this is our next topic in the series. We will do a larger position about this in the coming months, so if you have thoughts to share, then hit me e -mail ([email protected]or on LinkedIn.
