What are you doing about new Loan Officer compensation rules? (yes, this affects Realtors!)

What are you doing about new Loan Officer compensation rules? (yes, this affects Realtors!)

As everyone knows, the Dodd-Frank bill regulating new LO compensation goes into action on April 1st.  So far, the majority of mortgage lenders have interpreted this bill as severely limiting LO compensation.  Most of them will be paying loan officers based on the volume of loans closed (if they've put a plan in place at all!).  The result of this is that LOs will be getting paid less to do the same work as before.

Let me explain it a different way, and then I want to ask a question to the Realtors out there.  Any Loan Officer currently looks to make a certain amount of money per loan that they close (unless they work for a bank and have a base salary).  For the sake of argument, let's say an LO needs to make $2000 to $3000 per loan.  On a $200,000 purchase, the lender would charge 1% to make the $2000 in fee.  In the past, with smaller loans a lender could increase the origination charge or interest rate to bring the fee up.  On a $65,000 purchase, the originator would charge 3.08% (either in fee or interest rate increase) to make the same $2000 amount.  After April 1st with the new Dodd-Frank bill, that fee will be limited.  Most lenders are working on compensation plans that will pay between 1/2% (one half of a percent) up to 1% on the volume of loan closed.  So the new maximum fee on that $65,000 purchase is now $650.  The same amount of work goes into closing the loan, but the revenue is severely limited.  Revenue that is needed to buy leads, market, pay rent, make payroll, etc.

So my question for the Realtors is this: what are your plans to cope with the impact of the Dodd-Frank Bill?  Loan officers and lenders will gravitate towards working with Realtors that specialize in more expensive houses.  They have to, to make the same amount of money that was required to keep operations going as before.  Where will that leave Realtors that specialize in smaller homes?  The foreclosures and short sales, the No Down Payment homes, the limited income homes?  If you're a Realtor that is currently specializing in low home values, what are you doing to work with your preferred lenders so that those loans still get done?  What are your plans to increase the volume of these smaller sales so that Loan Officers and lenders will still give them the attention these deals deserve?  Realtors, how would it affect your business if you were suddenly limited to a 1% fee on every house you sold?

These changes are so new, right now no one has any definitive answers.  I wanted to float this out to the group to think about and discuss!