Mortgage Loan Officer (MLO) Job Classification and Department of Labor’s Determination as communicated to Southeast Mortgage during the past 6 month review and discussion to define the MLO’s true role in today’s Mortgage Industry
Historically Mortgage Loan Officers, Mortgage Processors, Closers, Specialists and Sales Assistants positions were classified as exempt under Part 541.200 Administrative exemption. These positions are now being reclassified as non-exempt.
Mortgage Loan Officer sales positions have historically been classified as exempt under the Outside Sales Exemption US Wage & Hour Part 541.500, 541.501 and 541.502. The outside sales exemption requires that the majority of the employee’s time be spent developing business and meeting face to face with clients and referral partners outside and away from the employer’s place of business. A place of business is an office or an MLOs home office. Due to the convenience of technology today, the majority of the business conducted by MLOs is done via internet, email, phone, and fax. In the past, this activity has been more incidental to an outside sale (face to face appointment with a client) and thus did not present a problem relative to meeting the outside sales exemption under Part 541. In the present, sales activity conducted via internet, email, phone, and fax is no longer incidental to, but is the primary way business is conducted. As a result, all MLO positions are non-exempt. To satisfy the exempt test, MLOs have to meet with clients at their client’s home at least 80% of their work time. MLOs will still be able to work both in and out of offices on an at will basis, but will be required to record hours worked on a weekly basis.
Although the U.S. Department of Labor (DOL) has not issued an official opinion letter specifically regarding the MLO position and the “outside sales exemption,” it did previously issue an opinion in 2006 which concluded that typical loan officers were exempt from Fair Labor Standards Act (FLSA) requirements for overtime payments under the “administrative exemption”. More recently in March of 2010, the DOL reversed the 2006 opinion and stated that the typical loan officer position no longer met the “administrative exemption.” As of January 12, 2011, The Mortgage Bankers Association (MBA) filed suit against the U.S. Department of Labor (DOL) in the United States District Court for the District of Columbia under the Administrative Procedure Act (APA). The suit seeks to set aside DOL’s Wage and Hour Division Administrator’s Interpretation No. 2010-1 (March 24, 2010) that reversed and withdrew a 2006 opinion letter from DOL to MBA.
Employees who fall under non-exempt classifications are entitled to a guaranteed minimum wage of $7.25 per hour for every hour worked between 1 and 40 in a work week and are entitled to overtime pay at a rate not less than one and one-half times their regular rates of pay after 40 hours of work in a workweek. Regular rates of pay are calculated based upon weekly earnings including commissions. All compensation must be paid on a W2 basis.
Under the current regulations as interpreted by the DOL, all Mortgage Loan Officer job classifications are non-exempt and are required to use time tracking systems to report hours worked on a weekly basis.
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