Conquer Complexity of Preparing for CFPB Audits with Automated Compensation
It shouldn’t come as a surprise when a CFPB examiner says, ‘I understand what you did in 2014 to 2015, but what did you do in 2012 and 2013?’ So expect a backward-look approach to this.”
1. Loan Originator Identification Information
Under the rule, institutions are required to provide LO identification information on certain loan documents. Since in this case more is better than less, make it a habit of always including the primary originators name and NMLS number. If you don’t have employee directory that provides this for you, a good resource to bookmark is the NMLS® Consumer Access website.
2. Compensation Agreements, Past & Present
As Calvin Hagins stated, the CFPB wants to know how loan originators will be paid in the future as well as how they are being paid in the past. While some LO’s compensation plans may stay the same over their tenure, others are likely to have changes. At the bare minimum, we recommend you maintain diligent records for all your LO’s past and present compensation plans that include the plan’s:
- Activation date,
- Inactivation date,
- Confirmation date,
- Number of times used to calculate the compensation,
- Minimum and/or maximum compensation amounts, and
- Tier level breakdown.
3. Loans Participated In
4. Direct and Indirect Compensation
All compensation paid to loan originators, whether direct or indirect compensation, bonuses, or straight commission, needs to be documented going back a minimum of three years from the date the compensation was paid. An efficient way to achieve this is with loan commission and bonus reports for every loan, that breaks down the employees tied to the loan, the loan details, amount of compensation paid to each employee, the nature of the compensation paid, who paid the compensation, and when the compensation was paid. Loan level reports like this can really help answer those questions the CFPB has regarding the factors that influence the compensation, how compensation was calculated, and what exactly played a role in how much compensation was paid.
5. Payroll Related Email Correspondence
A common CFPB request heard throughout the industry is for details outlining the interaction of and between payroll, HR, and origination departments in terms of processing compensation for LO’s, teams and producing branch managers. Among the types of communication records being requested is copies of emails sent to employees from the organization and third parties that pertain to the employees’ compensation. It’s like trying to find a needle in the haystack for mortgage companies with 100’s of loan originators emailing about their compensation each payroll period; without automated email archiving, it becomes quite a convoluted process trying to track down a specific email, especially going back three years. Implementing a process that automatically tracks and records all payroll related emails is crucial to a painless CFPB audit process.
An Alternative Approach with Automation and Integration
Fortunately, there is a solution to this madness – CompenSafe. With CompenSafe, all these items are automatically tracked, recorded, stored, and checked off the list for you. It removes the manual hunting and gathering of data spread across systems and spreadsheets by bringing every transaction that passes through your LOS together in one centralized location. No spreadsheets, no manual calculations and no bankers’ boxes required.