I just had a GE repairman come to my home yesterday to look at my freezer (Monogram) to diagnose what was wrong with the ice / water dispenser. As I thought, the motherboard had gone bad. For this 5 minute diagnosis (it may have been more like 3 minutes) we were charged a $75 trip fee. We were told that this is a common problem and that GE will probably help us with the repair costs. At any rate, it got me thinking about how we are paid as loan officers - and Realtors, for that matter.
Realtors and loan officers both do a lot of work for free while incurring expenses. Since I'm not a Realtor I can't speak for their model, but loan officers often spend time taking applications, running credit (which costs money) and running the loan through automated underwriting systems (which costs money). Depending on the closing ratio and other factors, a loan officer may take 4-10 applications for every 1 closing. It got me thinking that perhaps we as an industry should start valuing our time and service a bit more and get back to charging an application fee of, say, $75. We could also charge for the credit report and automated underwriting system charges.
Then I thought we could take that a step further and charge a fee for reaching specific milestones. This would help us to earn our pay as we go instead of all at the end and it would make the customer less likely to jump ship to another loan officer who is quoting an unreasonably low rate just to get the business. When the loan closes, we could get 1 - 2 origination points instead of the customary 2 - 4 points depending on what was paid by the client throughout the process. All of the money the client has paid would show up on the HUD settlement statement but it would allow us to get paid if loans don't close and it would force clients to manage their money a bit better since they wouldn't need to save such a big chunk for closing costs.
The Frank - Dodd act will drastically change how loan officers are paid on April 1st unless the lawmakers grow a brain and realize that what they are doing isn't good for the industry or the consumer. Their new law will limit the consumers' choices on how to structure their deals and it could very well force another mass exodus of loan officers. While there will be more business for those who are left, I anticipate huge delays for the deals in the pipeline and the remaining loan officers would be paid much less per loan. By charging for specific services (application / pre-approval) and / or milestones reached, loan officers could still make decent money - as a percentage, anyway. I think the Frank - Dodd act needs to be changed so that clients can have the choices they have always had, but either way I think we should look at changing how we are paid and stop working for free - this goes for Realtors, too.
I'd love to get thoughts and feedback on this so feel free to voice your opinion and give ideas.
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