June 9, 2014
Authored by: Bryan Cave Leighton Paisner
How a bank compensates mortgage loan officers can present legal risk for the bank. Banks need to make sure their compensation practices comply with the federal Fair Labor Standards Act and related state laws, as well as Regulation Z.
Threshold Question: Are Loan Officers Exempt or Non-Exempt?
The exempt / non-exempt status of mortgage loan officers has been heavily-litigated in recent years and has been the subject of several Department of Labor opinion letters. The inquiry remains very fact-specific and depends on what the loan officers actually do not just on their job descriptions. Relevant questions include:
- How the mortgage loan officers are compensated (salary basis, hourly basis, commissions, etc.)
- How much time (hours/week) the loan officers spend in the office (including a home office)
- What the loan officers do while in the office.
- What they do while working outside of the office.
- How involved the loan officers are in generating sales. (e.g., meeting with prospective borrowers at their homes or other locations, meeting with referral sources such as real estate agents, developers, etc.)
- How much time (hours/week) the loan officers spend generating sales.
- Others duties and responsibilities of the loan officers.
- How much time (hours/week) loan officers spend on those other duties and responsibilities (e.g., completing loan applications, gathering credit information and other documentation for the loan application process, etc.)
- How much judgment and discretion the mortgage loan officers exercise.
- How much flexibility the mortgage loan officers have in setting work hours and schedules.