── ── Industry
Mortgage — LO Compensation & RESPA Guardrails
The parent incentive-design aligns incentives while avoiding perverse behavior. In mortgage, incentive design is legally constrained: the LO Comp Rule bars pay tied to loan terms, and RESPA Section 8 bars paying for referrals. Design must produce alignment inside these hard limits.
Run Mortgage — LO Compensation & RESPA Guardrails on a real problem
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How it works
- LO comp may not vary by interest rate or loan terms (proxy analysis); may vary by permissible factors (volume, loan amount within limits, etc.). - RESPA §8: no fee/thing-of-value for the referral of settlement business; MSAs must be for actual services at fair market value (high scrutiny). - Design the incentive to reward outcomes that are term-neutral and referral-clean (e.g., quality, cycle-time, compliance), never terms or referrals.
When to use it
- designing/reviewing loan-originator compensation
- considering a marketing services agreement (MSA), lead-buy, or referral arrangement
- 'can we pay for these referrals?', 'can comp vary by loan?'
When not to use it
unrelated ops incentives with no mortgage-referral nexus.
Worked example
Mortgage — LO Compensation & RESPA Guardrails
The parent incentive-design aligns incentives while avoiding perverse behavior. In mortgage, incentive design is legally constrained: the LO Comp Rule bars pay tied to loan terms, and RESPA Section 8 bars paying for referrals. Design must produce alignment inside these hard limits.
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