Originator Comp Debate: Minimum Wage Labor Laws

As Dodd-Frank loan officer compensation regulations became a reality in early April, I started seeing new pay practices emerge in my reviews.  Several large retail mortgage bankers are now offering a minimum wage to outside referral based loan officers, not just call center originators.  

Here are some key components of the plans:

• Minimum wage that ranges from $8 to 12 depending on the loan officer's monthly volume
• Basis point paid on volume and credited against the minimum wage.  The minimum wage is not a draw.
• Some performance and/or quality piece that is paid quarterly

Two such companies have in-house counsel and have worked with labor attorneys in determining whether or not they're at risk of violating any labor laws by not paying their referral-based originators a minimum wage.  I’m not an expert on labor laws, but this growing practice mirrors comments I heard several years ago that all loan officers were entitled to a minimum wage...

I was attending a mortgage banking production conference that covered an array topics from loan officer agreements to marketing strategies and employment laws. One of the speakers was a labor attorney who provided a presentation on originator compensation practices.  The essence of his thesis was that 90% of mortgage lenders were in violation of current labor laws as it relates to loan officer compensation.  At the time, call center loan officers and referral based outside loan officers were being paid commission only.  He stated that all loan officers needed to be paid minimum wage, including overtime. 

Today most call center lenders pay their loan officers minimum wage and calculate overtime based on the total compensation paid (minimum wage and commissions earned). But most referral based originators are still paid commission only. What we’ve learned in recent years is our industry is being scrutinized from every direction and every angle.  From credit, compliance, national licensing and compensation, Congress and regulators have us in their cross-hairs.  Is this another area we might have to address?  If so, what might be the consequences? 

I’d like to hear from readers and especially from a labor attorney on this growing practice.  Does the Department of Labor require all loan officers be paid minimum wage?   Have these companies interpreted the labor laws accurately?

From a dollars and cents point of view, many operators don’t view loan officers as a fixed expense because they're paid a commission on the income they generate.  Some of these companies have 100 or more loan officers working in various branches.  If mortgage brokers or bankers are required to pay a minimum wage to all loan officers, this would add a BIG expense.   Here is yet another potential game changing threat to the industry.