How Will Loan Officers Be Compensated In The Future?

Mortgage and Lending with Mann Mortgage, LLC NMLS#284800

Loan originator compensation is still a big question mark out there. The goal is for a broker or agent not to steer the borrower into a higher rate. But basic bond math dictates that, all things being equal - especially risk, an investor will pay a higher price for a higher yield. Some buyers, tight on cash for closing, are offered higher rates so that the lender can cut down or cover the upfront fees.  That's pretty simple.

There are a lot of ways to pay a loan producer being discussed under the proposed changes coming up next year. They can receive a salary, a flat fee for units, a quality bonus, a portion of the servicing, income based on pull through percentage, a quarterly bonus, matching their 401(k).

Loan officers can receive additional marketing money, be paid by the hour, a percent of originations, money based on their "compare score". Some have even suggested giving originators income based on the long-term performance or servicing of their loans, like insurance agents. After all, insurance agents develop an annuity over time - couldn't the same be applied to loan officers?

Personally, I have always been paid on a 100% commission per transaction basis.  For me, this creates a sense of urgency on every single deal, no matter how large or small.  Just because a particular loan is $1mil does not necessarily mean that it is worth any more to me than a $200,000 loan since each transaction is negotiated individually.  The small deals in my pipeline are treated exactly the same as the large deals.

When you treat someone with a small loan amount differently, they know it.  You risk losing that client as a referral source, and let's face it, referrals are the name of the game. 

Also, will a salaried loan originator stay after hours to get a deal done?  Doubtful.

Whatever happens, broad sweeping changes to loan originator compensation does not "fix" the market.  What you may see is top producers, true technicians of the trade, leaving for positions outside of the industry.  Do you want to trust your next transaction with an order taker making $10 an hour?  I know my clients do not.

Posted by

 Kevin Kueneke, NMLS # 284800
San Diego County Mortgage Specialist
VA Mortgage Loan Specialist | FHA Mortgage Loan Specialist
Direct Lender | Mortgage Banker
Phone 760-500-1919 | Fax 619-419-2324

Visit My Website: 

Mann Mortgage LLC | NMLS #2550
11230 Sorrento Valley Road Suite 225| San Diego CA 92121


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Brian Doubleday
Brian Doubleday - IML RealEstate - Orange County, CA Broker - Ladera Ranch, CA
Ladera Ranch, Foothill Ranch, Lake Forest, Mission Viejo

It is so unfortuante that the powers that be feel that commission is the root of the issues, they never take into account that the crooks will always find a way around or through their rules and only the honest business people will suffer.

Oct 29, 2010 06:01 PM #1
Rodney Mason
On Q Financial - Atlanta, GA
FHA 203K & HomeStyle Renovation-AL,GA,TN

There are definitely a lot of questions still out there concerning our compensation.  We will see more exit the mortgage business.

Oct 29, 2010 08:39 PM #2
Kevin Kueneke
Mann Mortgage, LLC - Encinitas, CA
San Diego Mortgage Banker

I had the unfortunate experience of working with several "smash and grab" loan officers back in the neg-am days.  Guess what, those guys are no longer in the industry.  The tighter guidelines, a.k.a you have to afford the house you are buying, combined with the State and National mortgage tests have cleared many of those guys out.  Clipping our compensation makes no sense.  I wonder if the people in charge of the effort to limit originator compensation are taking a pay cut...

Oct 30, 2010 02:22 PM #3
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Kevin Kueneke

San Diego Mortgage Banker