Mortgage brokers can be required to return the fees and overages they earned on a closed loan if that loan is paid off or refinanced shortly after origination, according to a new policy from Wells Fargo & Co.’s wholesale lending unit.
In a bulletin sent to mortgage brokers today, Wells Fargo Wholesale Lending announced revisions to its early payoff policy.
Loans that pay off within 90 days of when Wells funded the loans will be considered an early payoff. The prior policy was 180 days.
In the event of an early payoff, the mortgage broker can be required to repay some or all of the broker originator compensation collected, according to the bulletin. The repaid fees include yield spread premiums that weren’t used to pay the borrower’s closing costs. Any repayments cannot be charged back to the borrower.
“An early payoff is an event of default under this origination guide,” the message stated.
The default occurs even if the original broker isn’t involved in a subsequent refinance transaction. It also kicks in when the property is sold.
The update impacts loans paid off on or after Sept. 1. Brokers will be billed for amounts due and expected to remit payment within 30 days.
“The EPO specific price caps associated with loans delivered to Wells Fargo Wholesale Lending will be removed for all loans received on or after Sept. 1,” the bulletin said.
Brokers have until Aug. 27 to fund loans under the old policy.
A Wells Fargo spokesman declined to comment beyond what the broker bulletin stated.