The Department of Labor said commissioned loan officers are entitled to overtime pay, reversing a 2006 ruling that favored the mortgage firms that employed the officers.

If the Wednesday declaration stands, it could increase compensation costs for mortgage originators at a time when production volumes are beginning to decline because of rising loan rates and expiring tax credits.

"If your primary job duty is to sell loans inside an office, then you are entitled to overtime" under the ruling, said Rachhana Srey, a senior associate at the Minneapolis law firm of Nichols Kaster, which represents loan officers working for Quicken Loans and Rock Financial. The Quicken/Rock overtime case is scheduled for trial in June. In its Wednesday ruling, the Department of Labor found that a mortgage loan officer's primary duty is sales, which "falls squarely on the production side of the business."

The September 2006 ruling in favor of the Mortgage Bankers Association classified loan officers as administrators, who are not entitled to overtime under the Fair Labor Standards Act.

"We're obviously disappointed with the Labor Department's ruling," said MBA Senior Vice President Steve O'Connor. "It has been, and remains our contention that those who fall into the category of mortgage loan officers described in the opinion spend a majority of their time performing exempt administrative or executive duties; thus they should be exempt from FLSA coverage."

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.