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#701025 - 03/14/07 03:00 PM Overage Polocy
Dollar Bill Offline
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Dollar Bill
Joined: Nov 2002
Posts: 107
Midwest
Well, I think I figured out how to post again. It's been a couple of months and I can't seem to find the red "post" arrow, as mentioned in the "How to POST a Question".

Would anybody be willing to share their institution's policy on monitoring overages in the mortgage department?

Any info is greatly appreciated. Thanks!

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Audit
#701031 - 03/14/07 03:08 PM Re: Overage Polocy Dollar Bill
rlcarey Offline
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rlcarey
Joined: Jul 2001
Posts: 85,445
Galveston, TX
Overages - do you mean on escrow accounts?
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#701168 - 03/14/07 05:01 PM Re: Overage Polocy rlcarey
Dollar Bill Offline
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Dollar Bill
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Midwest
No. Maybe I am explaining this topic incorrectly. But, our Bank sells a majority (70%) of our mortgage loans on the secondary market. As an incentive to the loan officers closing the loans, we allow overages up to 150 bps. The "overage" is split 50/50 between the loan officer and Bank.

Our regulators have asked us to implement an overage monitoring policy to ensure that we are not violating any fair lending laws (i.e. charging overages to one particular class and not another).

I hope that clarifies my question and I look forward to any feedback.

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#701268 - 03/14/07 06:10 PM Re: Overage Polocy Dollar Bill
rlcarey Offline
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rlcarey
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Galveston, TX
Wow - a dangerous practice in this day and age - no wonder your regulator is concerned. I haven't seen a bank that does this (it could be area specific) in twenty years. Your policy should outline exactly what and when overages are acceptable You should also be doing substantial monitoring of the pricing of all loans based on all the protected classes. The monitoring alone to prove that your practice is nuetral is going to be pretty extensive as you will definitely want to self identify any issues prior to the regulators doing it.
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#702252 - 03/16/07 02:33 PM Re: Overage Polocy rlcarey
Dollar Bill Offline
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Dollar Bill
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Posts: 107
Midwest
Thanks for your response. Our regulators are not "concerned" like the way your statement sounds. This is not out of the ordinary for the markets we are in to incent loan officers for closing the loan. Furthermore, there are several institutions that double the amount of overage that we allow.

We only allow an overage up to a certain amount and loan officers are not incented based on the type of product.

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#702360 - 03/16/07 04:01 PM Re: Overage Polocy Dollar Bill
MN Banker Offline
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This may be a silly question - but can someone explain to me what an "overage" is in this situation and how a loan officer is incented by this?

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#702413 - 03/16/07 05:17 PM Re: Overage Polocy MN Banker
rlcarey Offline
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rlcarey
Joined: Jul 2001
Posts: 85,445
Galveston, TX
The overage is when a par price is established for the loan by the bank and the loan office can price the loan higher by up to 1.5% (in this case) and then get to split the profits with the bank. Typically, the danger is that loan officers will price loans higher for less sophisticated borrowers which may fall into a protected class when their credit is the same as a more sophisticated borrower that then receives a lower price. It makes for nasty side-by-side comparisons.
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#702507 - 03/16/07 07:10 PM Re: Overage Polocy rlcarey
MN Banker Offline
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Thank you!

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