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SunTrust Changes Broker Compensation

Update follows settlement, similar move at competitor

Sept. 4, 2012

By staff

The wholesale lending arm of SunTrust Banks Inc. is changing its policy on mortgage broker compensation. Some speculate that the update, which follows a similar move at another wholesale lender, was prompted by a settlement at the nation's biggest residential lender.

New mortgage broker compensation policies were issued by SunTrust Mortgage Inc. on Aug. 7, according to a copy of a notice obtained by Mortgage Daily that was sent to wholesale clients on Friday.

Wholesale registrations taken as of Sept. 15 will be impacted by the revisions.

SunTrust will establish compensation rates at the state level based on where the broker primarily does business.

The maximum compensation in any state will be 2.5 percent. The maximum dollar compensation has been established at $15,000, and the minimum will be $1,500.

The compensation rate will be the same whether the borrower or lender pays the costs. But adjustments will be allowed on borrower-paid transactions for lock extensions or pricing errors paid by the broker or cures for Real Estate Settlement Procedures Act compliance paid by the broker.

"In accordance with our mortgage broker agreement, a separate communication is being sent to you giving you notice of the changes made to the compensation arrangement between your company and SunTrust Mortgage," the notice stated. "Look for this important communication to be delivered by mail in the next few days."

Mortgage industry commentator Rob Chrisman recently wrote in his newsletter that Aug. 1 changes to Franklin American Mortgage Co.'s loan originator compensation policy included a 2.25 percent limit.

"So in other words, FAMC is discontinuing borrower-paid compensation completely and fixing lender-paid compensation at 2.25 percent for all brokers for all loans," Chrisman wrote. "Word quickly spread that the decision was the result of the Wells Fargo-Justice Department settlement."

Chrisman was referring to a $175 million settlement in July between Wells Fargo Bank, N.A., and the Department of Justice. Disclosure of the settlement was accompanied by an announcement from Wells Fargo, the biggest residential lender in the country by loan originations, that it would stop funding mortgages that are originated, priced and sold by independent mortgage brokers through its wholesale channel.

The settlement resolved alleged disparate impact on mortgages to black and Hispanic borrowers originated by mortgage brokers for Wells Fargo Home Mortgage between 2004 and 2008.

"Wells Fargo cannot set loan prices for independent mortgage brokers nor control the combined effect of the negotiations that thousands of these independent mortgage brokers conduct with their customers," the company said at the time.

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