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LO Compensation Rule looms ahead
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8 Comments
I am leaving this business due to Gov’t intervention and the dictating my earnings ability being done by a bunch of folks who have never worked in sales for commissions in their lives. I’ve got 2 undergraduate degrees, and an MBA as well as every sales rtaining course offered over the past 40 eyars under my belt. I’ll see if they have any government openings with salary, benefits, retirement, medical, and more. All the things we work without. I am most likely too overqualified. Did I mention the fact that the government employees I’ve had the pleasure to deal with have never been at work or at least don’t answer the phones, my letters and faxes and my e-mails. I went into sales 40+ years ago when it was a profession. Today, sales in mortgages, is a very undesirable position to be in. We are treated like dirt! Not only do I work 60+ hours, without benefits, including many evenings with seniors at their homes, as well as weekends, early morning breakfast groups trying to drum up leads and referrals, compliance and other required training courses that we pay for, testing, licensing and regulatory items that are very time consuming and more, but I have to take the verbal abuse of the public that blames US as the reason for the downfall of America. I’d love to see those who came up wit these compensation changes, have to work in our shoes for even one day, or try to live on what we make over the next 1 year! They could’t and they wouldn’t. Enough!
Hi Mike:
I absolutely agree and I have some of the same issues that you have voiced here. I have degrees and 20 years of experience & training and take every opportunity to upgrade my knowledge in the marketplace. Recently, I have moved my operation over to a “mortgage banking” format, but eventually the Fed in their infinite wisdom will get to us as well. In fact, I have turned over most of my origination to my team to track and close and have chosen, for the time being, to concentrate on reverses. But in the present atmospere where everyone seems to be blaming the “big bad mortgage consultants and brokers”, it has become increasingly difficult to produce an income commensurate with the risk and regulation costs involved. (I used to get the question all the time: “why don’t you become a mortgage broker?”. Even as early as 10 yrs ago, I replied “I get all the money now, why would I take on more legal risk?” It never made sense to me. One thing I have done is to move into Asset Lending which is not highly regulated. I find this very satisfying and revenue rich. And, although the number of these I do is very low, they do produce a nice commission. I have also put into place a “side” business that runs almost automatically that is beginning to product a great third revenue stream. Completely different industy, simpler, with less stress. I envision I will be taking your same step in getting out of the residential lending industry in a couple of years. When exactly, I don’t know except that there will be a point where I say, “I’ve HAD it!” and exit. One of my realtor referral partners and I were talking about a month ago and both of us agreed that the real estate business is not fun anymore. And it really isn’t, especially here in Southern California. But….I am NEVER going to let ANYONE dictate my income, especially one who does not understand what it takes to be in business for yourself. If I have to move to another industry I will! Thanks for sharing your situation, and I wish you the best!
Mike,
I could not agree with you more. At the end of the day it is the big banks buying policy to gain market share and hurt the consumer. We need to storm the steps of Washington like Normandy.
The Federal Reserve is not even a Government agency where do they get the power to regulate how much anyone can earn?
The biggest struggle we are having is trying to design a Loan Originator Compensation Plan that fits reverse mortgage pricing while adhering to the Federal Reserve’s rule that “Loan Originators shall not receive compensation based directly or indirectly on any loan term other than the loan amount.” Reg Z, Verse 36[d][1].
So the era of splitting the amount of compensation earned on a loan is over. The FRB wants to eliminate the up-selling of rate and/or fees in exchange for higher compensation. On the forward side, we have adopted the policy to pay 1.05% of the loan amount when the L.O. uses our standard rate sheet price. Pretty simple: 1.05% of a $200,000 loan gets you $2,100 income. Our internal pricing structure is designed to keep L.O. compensation at around 50% of what the company earned on the loan. The rate offered to borrowers on our rate sheet will generate about 2.0% of loan amount, so giving 1.05% gives the L.O. slightly more than half.
In the reverse space, origination fees are calculated off of the Home Value and capped at $6,000. How do you write a policy giving a static percentage of loan amount that will remain sustainable for the L.O. and the company? On a $400K or $600K value home, the company gets a $6,000 origination fee. The requirement to pay L.O. compensation based only on loan amount means an L.O. getting 1.05% would get $4,200 or $6,300 on these loans when the company took in just $6,000. It seems like the Federal Reserve is mandating we get all fee income on fixed rate reverse mortgage through lender paid pricing models. “Free” enterprise? Where?
Maybe they are trying to unionize us.
The Fed, what a joke. What they are really saying is we want the mortgage business to continue as it is vital to the economy….Only don’t do business with those dishonest brokers; only do business with those honest banks. You know, the ones we bailed out with your money. I can only agree with the post of Mike Johnson. I will probably leave the business or join with a mortgage banking business. I can no longer deal with all the compliance and regulatory CRAP that is thrust upon us. Especially when it is coming from people that have no clue and that can’t be trusted. God help the poor senior who will inevitably be screwed by their own government.
Sorry for the typos, didn’t know it’d be published. Interesting responses and many seem alike. I am with a bank (not broker) but we cannot get the Loan Origination Fee on Fixed but can only earn a % of the YSP paid from the banks we use – – paid to our bank. Bankers too, are very much brokers in REVERSE now, unless they are funding their own loans. The playing field has been leveled, but the days of making 5-8% on $40K ($20-30K) are gone forever. We all know 3 REVERSES are harder to get than 10 forward loans. Spend $5,000 a month on mailers and seminars, get 3 deals that earn you $2K each, and ther result is . . . . . a net profit to you of $1K per month. Not worth wasting any more time if this is to be the case tomorrow. So the typical eraction will be for 100,000 of us to: A) not spend any money marketing (not good for the economy- as we are small businesses and the backbone fo America) B) generate leads and referrals for FREE by calling on professionals and asking them to become our TRUSTED REFERRAL PARTNERS, and hoping they will send business our way. If they do, we may be able to “eek out” a living, but if they don’t in large enough numbers, we may consider asking them for a job instead!
Good luck to all of you.