subject: Mortgage Broker-Set your Lender Pay Plans With LO'S [print this page] Mortgage Broker-Set your Lender Pay Plans With LO'S
Courtesy ofTucson Rates and Real Estate
If you are aMortgage Broker, one of the biggest questions you have to answer is : What percentage do I need to set my fixedBrokerCompensation PayPlan with my Lenders. If I set it too high, I won't be competitive in my market. If I set it too low, the Loan Officer will make his guaranteed amount, and the company won't make any money.If I add too many fee's into my calculations, then my Loan Officers are going to feel like they are getting a bad deal.If I set it wrong to begin with, I won't be able to change it with my Lenders for thirty days.
Take a deep breath. Every one of your competitors are facing the same dilemma. There really is a simple solution. You are in business to make a profit. Trying to set up your plan to undercut the competition is a double edge sword. Sure, you might get a little bit of extra volume from it, but being the lowest guy on the block won't be good for you in the long term. First of all, yourLoan Officers are on a guarenteed percentage. They will make their money regardless of what you choose. Any extreme concessions you make as a company, come directly from your pocket. If you are not profitable, you won't make it. You are at a disadvantage already against a CorrespondentLender. One of the best recommendations that I can make is, if you have an In House Processor, to invest some money to make them a compliant ,Contract Processor. That is going to be the main cost difference between you and a CorrespondentLender. If you don't know why, you should buy myLoan Officer Compensation Plan. Doing this one thing will give you as a company, an extra $ 400 to $700 per deal in your pocket, not split with your Loan Officers. If you don't do it, you will never compete on tight deals.Although,if you have a group of Highly TrainedLoan Officers, the Rate and Fee's aren't always the deal maker.If you are competing with 20 different lenders on each loan, you are going to have a problem. The biggest thing to realize is you are now in the Retail Mortgage Market. The days of Consumers being able to shop around for the best Rate is over. The good news is, your profits should increase!
The magic formula is this:
If you average 2% per deal, that is where you start.Then add any fee's you normally charge.Convert it to a percentage and there you go.The only other thing you need to take into account is how you will pay each individual Loan Officer. If the percentage is too high, you will be overpaying them, and it can turn out to be an enormous amount, in a very short period of time. Unless you have a compliant system in place to recover that money, it is gone. I doubt they will want to renegotiate a LOWER AMOUNT the following month. You need to set it up right to begin with. One thing for sure, if you are not ready coming out of the gate, you will be left behind. If yourLoan Officers first paycheck is bad, yourLoan Officers will go to work for a different company, with a betterLoan Officer Compensation Plan.If it is too generous, you don't make any money, and go out of business. Make sure you get it right.
