Effective April 1, 2011, residential mortgage originators will be required to follow the Fed’s new rules on how they can be compensated (unless the pending lawsuits or Congress is successful in delaying this). You can follow #LOComp on Twitter to see the dialogue that has been taking place across the industry. In many ways, the new plan will be good for mortgage originators. Our new comp plan was revealed today and after it was announced that out of our office, I was one of the “cheapest” LOs, I discovered that I’m getting a slight raise. Many LOs who like to charge less or to help absorb costs for their clients, will no longer be allowed to do this with the new rule. LOs who were used to making more on loans may find themselves getting a paycut, if not now, then when Frank Dodd’s plans kick in this summer.
I thought to illustrate what is happening, it might be helpful to review an actual transaction I closed a few months ago. It was a rate-term refinance, however, this scenario could happen with a purchase too.
These borrowers selected me to help them with their mortgage after I had been pricing rates for them for months waiting for rates to reach a certain point for their jumbo mortgage. We locked in their rate at zero points (origination or discount) in mid-October. During that time, we were in a refi boom and therefore refi’s were taking longer to close and it was a jumbo (which can also take longer to process) so I priced the rate with a 60 day lock.
The loan was locked with the lender who offered the best pricing at that moment based on their scenario for that time period. Although we’re correspondent with this bank-lender, they do not allow us to underwrite non-conforming loans AND we have to use THEIR AMC. There was a slight time delay (eats into the lock period) where the appraiser had difficulty connecting with the borrowers who had been traveling for a week and forgot to mention this to us.
The appraisal came back slightly lower than we had estimated however, the loan to value came in just slightly under 80% which made no impact to how their loan was priced. We submitted the loan to the bank for full underwriting with the bank’s AMC appraisal. The (out of state) bank underwriter determined that this home was too nice for the Seattle neighborhood and declined this “perfect transaction”.
By now it’s November and we’re dealing with the holidays…which also impacts the lock period…which is getting close to expiring. After much contemplating, the borrowers decide they would like to proceed with a second appraisal to support the value of the first appraisal…but first we have to wait for the bank to confirm they’ll consider…the lock continues to tick down towards expiration… the banks gives us the green light and we decide to try one more time with a 30 day extension to allow time for the 2nd bank appraisal and 2nd bank underwriting, 3 day right of rescission, the holidays… you name it. The cost for the 30 day extension is 0.5% of the loan amount. I decide that I’m going to split this amount with them. This means that it’s costing me 0.25% of my commission to close this loan. I also agreed to pay for half of the second appraisal if the bank approves the loan. The transaction, for my very patient clients, did close.
Effective April 1, 2011 – I will not be allowed to pay for anything on behalf of my clients.
As a mortgage originator, I will no longer be allowed to:
- pay for extension fees, or
- pay to cure items (for example, mistakes made on a good faith estimate that are beyond the allowed tolerances)’
- help pay for a 442 re-inspection;
- reduce my commission to help pay for closing cost.
This means that mortgage companies have to factor this new “cost of business” with how they will be pricing rates. This is going to cost the consumer, mortgage companies and possibly real estate agents when it’s down to the wire and and the mortgage originator is forbidden by the Fed to chip in for the cost to extend a loan. Many in the industry anticipate that rates will be slightly increased at the retail level in order for various types of mortgage companies, including banks, to deal with these costs which were commonly the responsibility of the mortgage originator.
NOTE: I’m not a mortgage broker – I work for a correspondent lender so the rules we follow are far different than those of a broker. I wish we all had the same rules to live by as “mortgage originators” regardless of the type of institution we work for…you’ll have to ask your elected officials back at Congress why this isn’t so.
It’s going to be interesting to see how our system is revised for pricing loans. I will automatically be paid a set amount which is based on the loan amount (allowed per the Fed). Consumers that I work with will be able to see real time pricing and decide what rate at what price they want based on what is available at that moment they elect to lock. My pay is out of the picture–and I do like that part HOWEVER, I do believe that if I want to chip in to help a borrower or reduce my commission because I know a transaction is a going to be a piece of cake, I feel I should have the freedom to do so.
My clients above would have to had either walked away from their transaction or have paid 0.5% of their jumbo loan amount to keep that rate…my hands would have been tied.
There’s so much more to this rule by the Fed but I just wanted to share one example of how I feel this rule is not going to do consumers any favors.
In my opinion, this smacks of HVCC and the 2010 Good Faith Estimate… great intentions from our government and clueless of the unintended consequences to the consumer…and our housing market.
UPDATE MARCH 28, 2011: NAMB is reporting via Twitter they have been successful in obtaining a temporary restraining order hearing for tomorrow morning.
UPDATE MARCH 29, 2011: Reading on Twitter that the Judge will rule before April 1, 2011 (by Thursday)…and that the Judge asked great questions and requested NAMB not file their temporary restraining order.
UPDATE 6:30 p.m. MARCH 29, 2011: NAMB and NAIHP feel pretty hopeful that LO Comp may be delayed until July for Frank Dodd. A note from NAMB that’s posted in Facebook is in my comments below.
UPDATE MARCH 30, 2011: The Judge rules against the temporary restraining order. View the Judge’s opinion by clicking here.
Rhonda, you are spot on. Boy that Jumbo loan scenario was so eerily familar. I currently have some shared or credited costs that benefits the client. It’s a shame this ability will be gone. We are seeing our admin fee raised and some pricing hits added to fee to cover all the new laws that are being imlemented. Who pays? The consumer. Great post!
Hi Rhonda,
“In many ways, the new plan will be good for mortgage originators”
Is there anything “good” for the consumer in this law, in your opinion?
Thanks.
“Is there anything “good
Yes, IMO this new rule has more good than bad. What the FRB Rule aims to do is to end predatory lending. Clearly the mortgage industry could not do this for itself or for the consumer unless forced by its regulator.
The rule brings more consumer protection. In return, the consumers will have to pay higher rates and fees.
I do like that some of the thinking regarding pricing is taken out of the equation. I’ll do my Total Cost Analysis, show them the rate sheet and they can pick. I earn the same regardless which option they choose, which is really the way it should be.
Brokering in its form now is about full disclosure. There is something refreshing about telling them exactly what we are going to make. Even more refreshing when they see the value and don’t care.
Yes, fees are going up and are rates will take a hit to cover new costs caused by the new laws. The market will simply adjust.
Honestly, my number one priority is better underwriting and getting rid of investor overlays. Those are deal killers and hell on LO’s and their staffs. There is not one single LO I know, and we know a lot, that is not feeling absolutely beat to a pulp right now. If clients and real estate agents really knew what hell we go through on the back end to get them the results they want… In that context we are grossly underpaid.
Many will exit. When you are getting killed by underwriting fear and overzealous compliance, it’s not worth the pay cut and stress. There are events and people that are out of our control. when the apple cart is upset by an outside force, who takes the hit? Us.
Our lending community is not happy right now. Exiting runs through my thoughts more frequently now. Not worth the hassle, stress and continual downward pressure on us. Seriously. Where is the joy in the business anymore? Hard to find. That is just a reality. You know me. I’m a very positive thinker, more than others almost to a fault.
Then like golf, you hit that perfect shot. And miraculously, it’s all worth it. LOL! You are still hooked. At least for a day…
Rhonda – fantastic write up on this!
Chik – as always you hit the mark with your comments.
We love our job, we love our job, we love our job. :):)
Chik, if RCG had “like” buttons for comments… I’d “like” yours. I couldn’t agree more.
I do like that our pay is now separate – it has nothing to do with the rate. Consumers no longer will have the need to ask “how much are you making” or “how are you paid” because it has nothing to do with their rate and we are forbidden to share any part of our commission with our clients.
Jillayne,
Many of the regulations that are being passed seem to be more about punishing an industry that’s all ready been reduced to nothing with a majority of the “bad actors” gone or in the process of being eliminated…instead of truly creating regulations that are helpful and beneficial to consumers.
Consumers: has HVCC helped you? has GFE helped you?
I’ve not heard from ONE consumer who has said HVCC or the GFE has helped them. They’ve muddled the process.
LO Comp falls into the same category as far as I’m concerned… I don’t see how it’s going to help consumers and with the higher rates it will most likely generate, even if it’s slight, is more than they (the consumer) shoud have to bear.
The rule makes no sense to me…and I wonder if it even makes sense to Paul Mondor. The Fed Conf Call w/Mondor the other day was a complete cluster.
Don’t underestimate how many “bad actors” still remain in the mortgage business. Yes, it is lower, but they are still out there and we run into them all the time. (No different on the RE agent side of things.)
Kevin,
I think it would be near impossible to eliminate all bad actors from RE…I WISH!! Do you see more “bad actors” on the mortgage bank side (Wells, Chase, BoA, Sterling–depository banks, credit unions) or brokers and correspondent lenders (sometimes called “mortgage bankers”)?
I’m also not sure how the Fed rule will do anything to remove the remaining “bad actors”. It will be tougher for the few remaining mortgage brokers but will do little to the remaining LOs who are paid by a “creditor” or bank except to not allow us to help borrowers out with cost AFTER the rate is locked (unless the rate is adjusted).
Rhonda:
We got our comp plans and like you I will be getting a pay raise. In fact, I ran our new comp plan based on my business last year and I would actually be getting about a 30-40% raise assuming volume is consistent. Part of the reason it is going to be so large is that as you mentioned in your post, I am no longer going to be sharing in the risk with my clients or company. I am not going to be eating price adjustments post closing due to suspense items, I will not be paying for extensions, botched appraisals, etc.
But as you mentioned and as has been stated on this blog and elsewhere for years, it is the consumer who is ultimately going to pay with higher interest rates. Every company has to create a “slush fund” which will be funded by higher rates for consumers so the company can absorb unanticipated losses that in the past the LO been responsible for.
I don’t know of a single regulation that has actually helped consumers. If people actually knew exactly how much extra they were paying per deal due to over burdensome regulations they would be outraged.
It’s maddening, Russ. One point that I want to make clear to consumers is that they CAN use “rebate pricing” to pay for closing costs (increasing the rate) however…I cannot pay for their closing costs (as we’ve been mentioning) from my commissions…no LO can after April 1, 2011.
I always felt that this was more of an influence of the big banks to limit the competition from the brokers .. this stuff so does not make sense and the whole process much more complicated than it needs to be as well as the regulation that come with it ..
It’s hard not to view it this way, gene, when there are two different sets of rules for those who work for banks and mortgage brokers. The industry really needs to have the same set of rules (including with the SAFE Act/licensing) in order to really help protect consumers.
Rhonda:
I can also see some nightmare closings where the need for a credit comes up. I no longer can just say take it out of my premium. Realtors better be ready to step up and offer rebates or there may be some delayed closings. All numbers are going to have to be dead on going forward…
The other issue I see is that consumers with smaller loans are going to find themselves locked out. Borrowers who need credit repair or other “extra” help in combination with having a smaller loan will see originators passing them off to either big banks or companies with substantially higher rates.
The rule basically prohibits us from charging more on loans that require more work so LOs are going to avoid those deals like the plague.
Russ and Rhonda,
Do you see any problems with the lenders not allowing for the agent to step up where the lender no longer can? I would assume it would depend on whether the offer and home inspection already maxed out the “allowable” seller and agent credits on a combined basis.
True, Russ. The examples in this post were from using my commission…not rebate pricing. The loan was locked and we were trying to head towards closing when the issues with the appraisal popped up…
BTW…I’m just reading on Twitter that NAMB has been successful in obtaining a Temporary Restaining Order hearing for tomorrow morning….interesting!
If NAMBs successful…I may not get my raise!
Yeah, I was actually kind of looking forward to the change personally. LOL.
I hear that the major banks will still probably move forward with the changes even if the Fed issues a TRO. The TRO is for the Fed, not the banks. Wholesalers can do whatever they want. I really doubt the big banks are going to stall this (especially considering they haven’t been fighting too hard to prevent it from what I can tell).
Russ, I bet you’re right… the banks want this more than anything and I feel they’re doing their best to influence the Fed.
We’ll know more soon….
Hi Ardell,
I’m sure agents will be allowed to step in where LOs will no longer be allowed to (this is where I’m surprised NAR has not been more involved with this)… as long as it’s towards bona fide closing costs and meets underwriting guidelines.
Bliss – thanks for stopping by 🙂
If this goes through, I think LO’s would need to explain in as much detail to their Realtor customers what to expect because there will be undoubtedly be agents that will question “why” they are being asked to contribute at the last minute and why the need. In other words, why, after so much scrutiny on initial fees being correct could there be a situation where there may be a needed contribution to close the transaction. Agents are not privy to behind the scenes financing contributions or credits that LO’s provide at the last minute to close deals. So I would hope that LO’s would take the initiative to explain what can happen.
I can’t speak for other LOs… I do let agents know when something has come up in the transaction – if it’s a second appraisal or the rate needs to be extended, I would assume the agent would be informed by the LO regardless of the compensation changes. I’m never one to “simmer” on what may seem to be “bad news”.
The big difference (if this is not delayed or terminated) is that the LO cannot pay for it. With the transaction above, even though it was a refi, the situations that happened could have taken place with a purchase as well… 0.25% of a jumbo loan and $550 in appraisal fees is a lot to eat…and I was happy to do it for these clients who I would clone, if human cloning were allowed…they are terrific clients.
There have been times where I’ve chipped in so much due to issues with HVCC or delayed transactions due to dealing with bank-sellers… no more after Friday unless NAMB is successful… we’ll know more tomorrow morning.
Is it not true that in your example your company could step up and make a pricing exception? it is true that the LO cannot pay for it, but the company could document and help with the cost as I understand it. Assuming the new rule, in those types of cases, the company you work for will be important as well. The decision has to be made at a level “above the LO’s pay grade”.
There is nothing in the new rules that make anything less expensive for the consumer, that is for sure!
Michael, are you referring to the “point bank”? Did you listen to the Fed conf call w/Paul Mondor? I was confused on whether or not the point bank is going to be allowed or not.
Readers: the point bank is where a mortgage company is allowed to slightly increase all rates and use the “overages” as a “bank” where if needed, a LO can ask management for pricing exceptions.
This seems to be a total conflict of the spirit of what the Fed is trying to do IMO…charge all consumers a little more to do favors for a few.
Reading via Twitter that the Judge will rule before April 1… http://twitter.com/dfwmortgagepro/statuses/52769322350804992
There is nothing this regulation does that couldn’t have been accomplished by encouraging consumers to simply shop around. Instead, we are going to cost consumers thousands of dollars in unnecessary expense, not too mention the burden put on mortgage lenders to comply with this asinine regulation.
The mortgage market needs SIMPLICITY, not more reams of disclosures.
Russ, wasn’t the GFE designed with the intentions for consumers to shop around? Too bad HUD didn’t think through all the concequences if a LO actually provided a GFE w/out a property address (a hem… this is WHEN buyers are shopping!!)…now they have a document that NO LO will use in their right mind without a bona fide property address since the GFE cannot be re-issued on the basis of adding a property address once the buyer has found their home…another government mess.
Looks like we’ll have more info by Thursday (according to the #LOComp noise on Twitter)…
I find that I have to fill in that “gap” created by NO GFE’s. Not a biggee. I like doing it. But how many agents can and do? I have to take all the worksheets and turn them into HUD 1 “Facsimiles”. 🙂 Otherwise the buyer gets all tangled up in the red tape of the mess created by the “new rules”. Apparently the only one who can give them the numbers is someone who isn’t subject to the rules, like the agent. Or so it seems.
The reason I convert the numbers to a HUD 1 is so they can see the charge for Owner’s Title coming back to them on Page 1 of the HUD 1. There’s just no other way, or no better way, to explain the over reporting of charges on the GFE.
I create a screencast for all of my Good Faith Estimates and include snap shots of page 3 of the loan application which shows the owners title policy credit.
I cannot imagine sending a GFE to a client without have a video recording for them to rely on… the document is so poorly crafted that it’s confusing to just about anybody. Even if I’m meeting with someone face to face, I’ll follow up with the screencast just so they have it to refer to later.
I also refer to page 3 of the loan ap since it shows actual funds for closing, which HUD’s GFE also lacks.
Dear Rhonda,
That’s a very good idea and I am going to start doing same. I had been sending a video along with my worksheet using the Mortgage coaches product, “The Edge” which gives consumers a great deal of information in an easy to understand format. It’s all part of being a good SALESPERSON who takes care of his/her clients as if the future of their business depends on doing so because it does.
Sincerely,
Steven B. Harkness
The Edge is a great product… I’ve been test-driving that myself… I’ve been using the old (original) Mortgage Coach from 10 years ago…it’s so old, it no longer has support 🙂 I stopped using one of MC’s newer products when it would make recommendations for my clients… I’ve always felt it’s my job to provide information and educate consumers to help THEM make financial decisions. I’m happy to provide my opinion, but I don’t want a system or machine to generate that for me… Edge looks like it’s a huge improvement.
I think it’s important that LO’s invest in tools to help them with their biz…I’m always amazed when I have a competitior ask “why do you watch the bond market?” for example. Something that many people may not realize is that it does cost money for LO’s to do our jobs.
Just received this update on LO Comp from NAMB via Facebook:
This is a note from Mike Anderson:
I spoke to Mr. Glen Corso the managing director of the CMBP who said the following in an email to his members tonight. He gave me permisssion to post their assessment of todays hearing. He went on to say that the NAMB attorney was excellent and was very quick, responsive and on point with the judges questions. he also complimented the NIHP attorney and said he did a good job as well. here is the email:
The judge today held a 2 1/2 hour hearing in the law suit on the Loan Origination Compensation regulations. The hearing was on the NAMB/NAIHP motion for a temporary restraining order to prevent the rules from becoming effective on April 1. The hearing went very well from the lender standpoint. The judge was extremely engaged, she asked good questions and was very even handed in her approach. If anything she grilled the Federal Reserve attorney in a more rigorous manner than she did the attorneys for the two broker groups. Best of all at the end of the hearing the judge gave the CMBP attorneys, representing our group in our amicus brief, a chance to speak and they were able to make our points on the Fed overreach and the arbitrary and capricious nature of the rule.
Our lawyers, and the lawyers for the broker groups, were feeling extremely good and upbeat after the hearing. It is hard to predict how a federal judge will rule, but everyone felt that we made a strong case and answered all the judges questions in a way that advanced our cause. The judge’s last words to all the parties were that we should expect her ruling shortly. If the judge rules in favor of granting a temporary restraining order, she will probably also grant a preliminary injunction, which would prevent the rule from becoming effective until after July 21st, when the new Consumer Protection Bureau comes into effect. At that point we will have the opportunity to make our case again in the regulatory process that the new Bureau will have to follow before they can promulgate regulations to enforce the Dodd Frank Act loan originator compensation provisions
Way to go Rhonda, you always seem to get the news first, and what a B-day present. You see July 21st is my 50th Birthday. Ack!, why does that sound so old?
I don’t think that’s old! My hubby is going to be 50 in August 🙂
I’m constantly plugged in… I sometimes work w/3 computers…our recent short vacations are typically someplace where wi-fi and computer access is not available.
And I do think that being a blogger forces you to stay on top of subjects you write about
Well, I will be praying the judge does the right thing. We have taken such a beating the past three years, and then I read posts like Jillayne’s and I ask myself, “why am I still doing this?” The answer I always come back with is: I can’t leave feeling like something or someone has beat me, I am to stubborn. I was at the top for so many years…long before sub-prime was even thought about. I knew there was something very wrong when MILA would go 100% CLTV with a 560 FICO. I didn’t know about the hedging of risk by Bloombergs and others at the time or I would of yelled, “FIRE” and jumped over the side then. I can’t let these conniving SOB’s win, and at the expense of the US middle class, not to mention the US taxpayer, and then Jillayne….she just makes me dig my heels in that much harder. Good thing I never took up bull riding because I would probably be long dead by now. Killed by one of those 2000lb mean, nasty, horned, cowboy killers, called Bulls.
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Steve, I think the U.S. middle class will be just fine if the FRB rule passes. If they were reading, I’m sure they’d thank you for worrying about them.
Jillayne, I disagree. But let’s take our opinions out of the argument… what if consumers had a choice:
1) select a LO who is able to price a rate based on difficulty of the loan and who can use their commission, if needed, should an issue arise after locking.
2) pay about 0.125 more in rate in order to have “protection” from the LO charging a higher origination fee. LO may not use commissions to help with any closing cost.
Consumers should note that they still can and should select their LO responsibly…selecting option 2 is no guarantee of quality.
Consumers: if you have or are considering a mortgage, please complete this three question survey: http://www.surveymonkey.com/s/VHCBJXM
Rhonda,
What are the “reasons against” number 1
What are the “reasons for” number 2
The FRB Rule give us the answer to the question.
As I stated in my comment…right now I’d rather her from consumers and take our opinions out of it… I don’t trust the Fed or much of our government since they’re mainly controlled (or at the least strongly influenced) by lobbyist to do what is the best for consumers… if it were true that the government does what is best for “the people”…we’d be living in a different world.
If you want to believe that because “the Fed says” or the government is doing a great job… keep on dreaming, Jillayne.
Certainly seem to be enough comments in all these responses pointing to my (real estate broker) pocket book .. if lenders can’t contribute, why on earth should the agents .. who in most cases are the front line originators of the deals being done! Rhonda, you are right about NAR not taking a stand here! It will be interesting to see this play out. Hopefully LOs will explain the potential increased costs that could come up during the loan process without suggesting they have their real estate broker pick up the chips.
I would never suggest an agent pay for anything in a transaction, Di. I was just talking with Marilyn Porter, President of Mortgage Master Service Corporation (my boss… and yes, DFI makes me spell out the entire company name) and long time mortgage originator…she’s congratulating me on my raise that I don’t want.
Just like this post, I liked having the the freedom to decide if I wanted to pay for an extension or help out with a second appraisal, if required…I can’t do that anymore.
Consumers will need to be prepared for additional cost…they can thank the Fed. This is the Fed’s idea of providing protection to consumers from predatory lending.
With a purchase, if a loan is extended (at least transactions I’m involved with) it’s due to a delay in the transaction and rates are typically locked based on the closing date on the p&s… so all parties should be aware that IF you’re extending the closing date on a transaction where the rate is locked, there may be an extension fee that someone (not my commissions now) will have to pay for.
The other issue I see with this scenario is that if the consumer has to bring extra funds to closing, of course they’ll have to be verified and seasoned.
Rhonda – I know and trust you to the nth degree – no worries about your conduct from this broker! It is just an easy thing to slip into a conversation with some who are not so respectful and with your standards … all the more reason we need to have strong relationships with our key business partners as much as possible. I like have the freedom to base my fees on time invested and complexities of a transaction as well, so I am glad for my freedom and hope it lasts. However, all things change and real estate brokerage fees are always under fire from regulators too. Happy lending and happy selling to us all!
Di, you’re lucky to have the FREEDOM to help your clients with your commission… I think that’s one of the points that angers me the most.
As I read the Judge’s response referencing the mortgage meltdown as background information for LO Comp… IMO the meltdown has a lot to do with CONGRESS pushing Fannie, Freddie & FHA to provide more programs to more borrowers (lower the bar) to increase homeownership. The GSEs did as directed and look what happened… I have YET to hear anyone in Congress say “woops… that didn’t work so well”
Yes… there were side effects to the programs Congressed pushed including many LO’s getting in the biz for “easy money” during a time when there was little to no regulation AND the regulations that we did have were IGNORED (think WaMU, World Savings/Wachovia, Countrywide….)…
So I say thank you, Government, for taking this out on the little guy with the least amount of lobby dollars… thanks for harming a small business industry that employs many and that has seen a huge (and much needed) reduction of LOs.
I thank my lucky stars I work for an established correspondent lender… I feel terrible for the mortgage brokers who keep getting kicked in the teeth.
Well the “Thank My Lucky Stars” part is what you must keep focusing on and I applaud your business stamina and practices throughout all of this. I believe it’s a new world in lending .. again. Hopefully the consumers will benefit in some way.
Now we Realtors(R) have an immediate decision to be making and I’m glad for my twitter voice! NAR is proposing a Realtor(R) Party! and I don’t mean margarita ville! It’s a proposal to increase dues $40 per year and spend it and more on top of that to support politicians who support homeownership. I don’t think we need a special political party for that nor do I want my money placed into the campaign funds of someone I would not vote for based on broader issues and passions I support! We have until May to voice our opinions to NAR leadership.
these last few years, Di… I sometimes have to put on blinders to all the legislation that has been dumped on our industry or I would probably give up out of frustration. You should have heard how terrible the Fed conference call was about LO Comp… the person who brags about being one of the authors confused himself on the call.
Hopefully this new rules will help people to keep their homes. This administration are really helping people especially to those who are victims in mortgage crisis from the past years.
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Hi Rhonda,
Just wanted to say that I’m glad that you understand the “real world problems”. I too am forced by our government to get a raise that I didn’t ask for and don’t want. I hear alot of complaining from so-called brokers that they can’t live on anything less than 3% on loans. It’s nice to see someone besides me that thinks this law is wrong for the right reasons.
Bob, is your company proceeding as if the LO Comp plan is in place? My employer is waiting until Tuesday before they make any changes…so I’m still on our old (pre-Fed) plan.
I believe the 3% cap is Frank Dodd and doesn’t go into effect until summer… the only way I can see the cap impacting me is if it liimits rebate pricing for consumers to pay closing cost… however I wonder if the Fed’s LO comp rule goes into effect and our commission is disconnected from the rate, why have the cap? (Like you, I’ve never made that much on a loan).
Rhonda, I’m President of my own Mortgage Broker company. I am a one person shop, so I don’t have any loan officers to pay. I agree, the cap is useless if this law goes though, since lenders already will have caps in place. I don’t have a problem with that, just don’t tell me that I have to earn a minimum amount. It should be our right to do loans for free if we wanted to.
I don’t know how the new comp plan is working for other Lo’s…and would like your input on the topic. (Bob…you are not only a Lo but the owner..Pre April or after..your still getting 100% of total bps..I wonder how the regular employees pay is affected?)
When we were presented with the new pay structure at my company it looked better than before…due to a higher avg cap % than compared to the overall lower pts avg/per Lo pre April.. Until one of the “Smart” Lo’s said to compare what the company is now making vs what you are making via (lo bps paid/company total bps paid)
The truth is not good. In the pre April 1st revenue compensation, our over all % was far greater than now. Now the company is making more but the lo’s are making less.
My company has elected to get paid 2% per loan(jumbo’s are less..but will just keep it simple)..For eample: loan volume is 1.5 million for the Lo in that month
thus 1.5million in volume @2%=30k
With the new structure the company pays the Lo 10k…or around 33% of total bps.
pre April 1st I would get 65% of 30k…or around 19k
Looks like my Boss will be making more under the new plan than the Lo’s.
I have been “shopping” around talking to other lo’s at different companies and once you compare.. not what you made pre April vs after April…but what you are making as a % of what the company is as of now….well your pay has decreased.
Are you experiencing the same or heard from other Lo’s that they are now making less by %?
I pretty much keep my nose to the grindstone… I’m not interested in changing employers – I’ve been with Mortgage Master for eleven years… so I don’t know (or pay attention) what other companies are offering.
This is a good example of why consumers should not be lulled into thinking that now we have LO Comp, that all rates are the same with lenders. Mortgage companies/lenders are pricing in their cost of business, including what they’re paying LO’s and the cost they need to cover that LO’s can no longer pay for out of their commissions.
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