"So Rob, How Do You Get Paid?"

Mortgage and Lending with Guaranteed Rate, Marin County, CA NMLS: 22343

"So Rob, How Do You Get Paid?"


Not all of my clients will come right out and ask this question.  But even where they don't ask I suspect that most of them think it.  Not only is it a fair question, it's a great one too.  One that I have no problem discussing and explaining.  Sure there are elements of our compensation that are highly technical --- the result of the byzantine regulation that keeps our industry in a chokehold ---- but I still think we can have an honest discussion about how I get paid and how, in turn, this relates to the rate and terms a consumer will obtain when working with me to get a home loan.


In addition to all real estate being local, it is also really quirky.  Most people who buy and sell a home know exactly what the real estate agent is being paid.  Here in the San Francisco Bay Area, for example, a 5% total commission on the sales price is common, so if selling a home worth $1MM, the listing agent would gross $25,000 and the same for the selling/buyer's agent.  But in the case of financing, there are far more "moving parts" and trying to determine how your lender is paid can be, to paraphrase, a riddle wrapped in a mystery inside an enigma.  Why is this?


Memories.  The Way We Were.

Back in "the day" loan originators had tremendous flexibility over their compensation.  There were a lot of ways for the originator to obtain revenue in the loan; the rate itself, charging up-front "points" on the rate, collecting various fees, etc.  Sort of like the auto dealer who can work with the trade-in value, the cost of the new car, the rate on the financing, and so on.  Now this doesn't mean that the consumer always got a bad deal as a result, it just implies that there were more tools in the "let's make a deal" toolbox.  All this has been simplified, for better or worse as we'll find out below, and now we are down to just two ways:

  1. By the lender.  This means that the originator's profit is built into the rate you choose.  It is paid by the entity that is providing the funds (bank, credit union, hedge fund, etc.).
  2. By the borrower.  Yep, that's you.  This means that you can pay the originator directly.  If you do this, however, the originator may not also obtain revenue from the lender.  It's an either/or proposition.

So are you ready to pick your poison?  Which will you choose?  Lender or borrower paid?  Let me help you.  It's not up to you.  Regulators have already forced your originator's hand and the vast majority of originators, including the big banks, are now operating on the lender paid model.  Remember, this is not inherently better or worse, but it's the way the industry has responded to regulation that does not permit the consumer and originator to negotiate terms.  We'll cover this next.


Learning to Be Present

Cell phone in hand, I have been accused by my wife more than once that I am not being "present," but when it comes to loan officer compensation in the modern world, most of us have a compensation setting that cannot be changed.  Once you set it (let's say it's 3/4 of 1% of the loan amount) nothing is changing regardless of loan type, interest rate or borrower characteristics.  This, of course, is aimed at preventing disparate treatment of customers.  But how it manifests itself can be put in simpler terms --- we cannot go on sale or make a deal.  If another originator sells my client a lower rate, no matter how inexperienced that agent may be, no matter how dismal their execution and no matter how inaccurate I feel their quote, I cannot "match or beat."  Here's why.  Regulation says that if I have the power to cut my margin and make Carrie-Careful-Consumer-with-the-Clean-File a better deal because of all of her research, then what's to stop me from hiking the rate on Carl-Care-Less-with-the-Compromised-Credit?  In short, with no flexibility, nobody gets helped and nobody gets harmed.  So, there are two takeaways here:

  1. Your lender cannot treat you any different than anyone else.  One size fits all.  This holds true for the rate and program too.  Whether you get a rate of 3% or 4% or 5%, or a 30-year fixed rate loan or 5/1 ARM, the originator's compensation will be the same.
  2. Your loan originator's compensation settings have been determined before you walk in the door, and they're not going to change no matter how much he/she likes you or vice versa.


Moving On

Like with financial regulation in general, I have noticed there is a public sense of relief that the concepts they do not readily understand now have stopgap measures to prevent abuse.  As an ethical loan officer with a 5-star reputation developed over 16+ years, I like that idea to the extent that I dislike the lack of discretion we can exercise as a result.  In environments where regulators have also set maximum debt-to-income ratios I would LOVE the ability to reduce my margin on a loan and make a qualification work for the borrower who otherwise just misses the mark.  Yet we have to accept that if we want a heavy-handed watchdog, we will not be at liberty to do all the things we'd like, even if nobody gets harmed in the process.  In a perverse irony of scale that is just too big, the "too big to fail" legislation that encompasses loan officer compensation rules has only made the large banks larger and, some would argue, fostered the emergence of the call center loan agent --- tech savvy, but not technically guideline savvy.  I maintain that real estate transactions are inherently complex.  If the good people can't be paid at their grade, they leave the industry and take their experience with them.  And that leaves the rookies minding the store.  Trust me when I say that top Realtors do not want their clients working with inexperienced loan agents.  There's simply too much at stake.


Perhaps the question of how we get paid is more involved than you'd imagined. Much of what is now law runs counter to the way business is done in most other segments of the economy and those shopping for the single biggest investment they'll likely ever make need to know that.  Personally, I choose to price competitively, out of the gate, but that's always been my philosophy.  Curiously though, I sense that average revenues in the industry have gone up as a result of us not being able to negotiate.  Because of the "take it or leave it" choices that are left, consumers, in turn, are sometimes forced accept higher rates than they could have otherwise obtained via research and negotiation.  Of course the cost burden of implementing and supporting all of this regulation is an expense the consumer ultimately bears as well.  These are both unfortunate.


So, I am glad you asked, "Rob, how do you get paid?" While not a simple answer, the understanding that results will allow you to identify the best deal you can given the choices that remain.


Dollars and sense, 



Robert J. Spinosa
Executive Loan Advisor
NMLS: 22343 
Cell: 415-367-5959 Fax: 415-366-1590
rspinosa@rpm-mtg.com    www.rpm-mtg.com/rspinosa 
1058 Redwood Highway, Frontage Road, Mill Valley, CA 94941


LendUSA, LLC dba RPM Mortgage NMLS #1938   Licensed by the Department of Business Oversight under the California Residential Mortgage Lending Act. 


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Sam Shueh
(408) 425-1601 - San Jose, CA
mba, cdpe, reopro, pe

 I know several real estate professionals. They are paid by transaction or a salary. Their brokers provide leads and negotiate a commission often discounted.  The reputation of agent varies. Some honest, others may not.

How do mortgage officers are being rated is beyond.  I know VP with a major lended is by the volumn of business. What about loan brokers?  


Jul 07, 2017 08:25 PM #7
Lou Ludwig
Ludwig & Associates - Boca Raton, FL
Designations Earned CRB, CRS, CIPS, GRI, SRES, TRC


I'm happy to answer that question . . . . Why do you ask.

Good luck and success.

Lou Ludwig

Jul 07, 2017 08:26 PM #8
Lou Ludwig
Ludwig & Associates - Boca Raton, FL
Designations Earned CRB, CRS, CIPS, GRI, SRES, TRC


Congratulations on the gold star feature on and outstanding post.

Good luck and success.

Lou Ludwig

Jul 07, 2017 08:28 PM #9
Mega Team Real Estate
Realty ONE Group Alliance - San Mateo, CA
San Francisco and Peninsula Real Estate Concierge

Great Feature! Thanks for sharing such a good information.  

Jul 07, 2017 10:17 PM #10
Laura Cerrano
Feng Shui Manhattan Long Island - Locust Valley, NY
Certified Feng Shui Expert, Speaker & Researcher

A gold star future is nothing to sneeze at and you should be proud of it very much!

Jul 07, 2017 11:37 PM #11
Laura Cerrano
Feng Shui Manhattan Long Island - Locust Valley, NY
Certified Feng Shui Expert, Speaker & Researcher

I love that your name is Mega Team! Very marvel comics of you ! Mega Team Real Estate Love and light and all that blessed stuff!

Jul 07, 2017 11:39 PM #12
Dennis Swartz
Full Circle Property Management - Columbus, OH
MBA, GRI...experience counts!

Excellent post, very informative. I like te new model of pay for lenders as it seems fair to all potential clients.

Jul 08, 2017 04:11 AM #13
Debbie Gartner
The Flooring Girl - White Plains, NY
The Flooring Girl & Blog Stylist -Dynamo Marketers

thanks so much for sharing.  This makes perfect sense, and I have wondered about this from time to time.

Jul 08, 2017 04:44 AM #14
1~Laura Filip
1~Laura Filip Broker , Opening doors for All Seasons of Life - Whitesboro, TX
What can we do for you today?

Very interesting post. Thank you for sharing the information. Have a great day stay cool it is hot here in Texas 

Jul 08, 2017 05:07 AM #15
Chris Lima
Atlantic Shores Realty Expertise - Port St Lucie, FL
Local or Global-Allow me to open doors for you.

Excellent post, Rob.  Thanks for sharing.  I will bookmark for future reference.

Jul 08, 2017 06:19 AM #16
Jeff Dowler, CRS
Solutions Real Estate - Carlsbad, CA
The Southern California Relocation Dude

Hi Rob

Great information to share with buyers. No doubt it's a common question, whether voiced or not.


Jul 08, 2017 07:55 AM #17
Richie Alan Naggar
people first...then business Ran Right Realty - Riverside, CA
agent & author

Any laborer is worthy of their wages....pay them all!

Jul 08, 2017 08:04 AM #18
Beth Atalay
Cam Realty and Property Management - Clermont, FL
Cam Realty of Clermont FL

Hi Rob, this is a question that's asked often, great explanation.

Jul 08, 2017 09:03 AM #19
Matt Brady
Finance Of America - Del Mar, CA
Lending With Competence And Character

The side effects of regulation are not talked about enough. I too wish I could contribute to certain clients to help them qualify. The appraisal industry has been affected worse than lenders. The best used to get more business just like every other industry. Now, they just wait in line like cab drivers and you get what you get. The bad appraisers get the same amount of business as the good ones.

As lenders, I think we are storytellers, and presenting the right loan with the right scenario the first time to an underwriter is key. This is why I do not think top lenders will be replaced by call centers or computers.

Jul 08, 2017 10:34 AM #20
Gene Mundt, IL/WI Mortgage Originator - FHA/VA/Conv/Jumbo/Portfolio/Refi
NMLS #216987, IL Lic. 031.0006220, WI Licensed. APMC NMLS #175656 - New Lenox, IL
708.921.6331 - 40+ yrs experience

First ... I am FEATURING this post, as I totally agree with you, Rob Spinosa ... most have no clue as to how LOs get paid.  I've found some LOs that don't even understand it well ... and certainly could not explain it anywhere as well as you have here.

As far as working with rookie LOs .. or those LOs that may get "paid" less ... I personally believe, like you, that the level of knowledge and expertise typically attached to the lesser pay comes with high risk.  And I'd also say that on paper the "pay" may appear less and a bargain, but in reality can end-up costing Borrowers (and the other professionals within a transaction) far more.  In money sure, but in time, effort, and stress as well. 

Excellent, excellent job at explaining this complex (and at times, fairly controversial) topic.  You did we LOs proud ...


                                                  FEATURED IN BANANATUDE!



                                      CONGRATULATIONS!   WELL DONE!



Jul 08, 2017 02:44 PM #21
Praful Thakkar
LAER Realty Partners - Andover, MA
Andover, MA: Andover Luxury Homes For Sale

Rob Spinosa - sooner we answer this, better. Usually I bring this topic myself - as most buyers believe that they don't have to pay the agent, seller pays (which is true in most cases.)

Jul 09, 2017 10:54 PM #22
Laura Cerrano
Feng Shui Manhattan Long Island - Locust Valley, NY
Certified Feng Shui Expert, Speaker & Researcher

Be sure to be careful what are you realtor people reveal to people as far as money making because sometimes they won't understand, I find

Jul 19, 2017 11:44 PM #23
Laura Cerrano
Feng Shui Manhattan Long Island - Locust Valley, NY
Certified Feng Shui Expert, Speaker & Researcher

I do agree that the sooner the better is the way to go overall. I see all the perspective at the same time, weirdly

Jul 19, 2017 11:44 PM #24
Georgie Hunter R(S) 58089
Hawai'i Life Real Estate Brokers - Haiku, HI
Maui Real Estate sales and lifestyle info

This was very interesting and well explained.  I too liked the historical explanation, and I like the pictures you use in your blog.

Jul 28, 2017 07:23 PM #25
Roy Kelley
Realty Group Referrals - Gaithersburg, MD

Thanks for your explanation.

I hope you are enjoying a most productive summer.

Aug 01, 2017 09:15 AM #26
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Rob Spinosa

Vice President of Mortgage Lending, Marin County
Can I Get a Jumbo Loan with 10% Down?
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