Socialist, Big Government Price Controls is what this is.It should ALL be eliminated and try free market capitalism –for once! If you want to change something for the better, get rid of this whole, totally outdated (and put there by the Big Banks) itea of Origination points vs Discount pts, yada yada and the distinction of bank, banker, broker and just compete with minimal, but effective oversight. Let the consumer judge who has the best rate and service, irrespective of the “kind” of institution. Make it a real level playing field for all—nice, simple, clear and get rid of the crazy Bysantine laws and comp plans. That will make it less expensive–passed on to the consumer–and allow us all to compete. The ultimate dread of the Big Bank Boys.
you guys are always good for a chuckle. Guns LOL there are more guns then people in the USA, I believe that to be fact. LO comp leave that up to the LO no caps no minimums. The LO’s need to be fair and responsible for their own actions. If you charge one person 3 pts you better be charging everyone 3 pts for that month or 90 days (whatever your policies are) or your going to have some explaining to do. Ask Honda how they did with the CFPB.
When you buy a bottle of milk in the store, have you once told your grocery store that they should charge you the same as Walmart? Why can’t you make a law that all stores who sell milk can only make a 1 dollar profit?
Why are you talking about LO compensation and not total profit a bank will make on a deal. Let’s cap the banks margin across the board. Isn’t that a better ideal?
I disagree with the statement that the companies don’t have to give anything. That’s the only thing allowed now. If the LO makes a mistake, the company covers it. If the LO, needs to give away margin to make DTI work or be competitive, the company gives it away to make it work. At least that’s the way we do it at our company. The LO has leeway of 1/2 point as well at our company. My LO’s have all said they’d love to have the flexibility to drop their commission from time to time make a deal work for one reason or another.
Great topic today Frank and Brian!! This has been a topic that I have been addressing for over a year now. I changed companies back in August of 2018. I addressed with my former Regional Manager that with the changes in our market that our pricing was way off to our competition. I pointed out that our company offered a great LO comp plan, but it was obvious that we needed to make adjustments by reducing the “Margin” set-up for the Branch and the LO comps to be reduced to allow more competitive rates to be offered to our Clients that are purchasing or refinancing their home. I spent more than 6 months with my former Regional Manager and Branch Manager, arguing this need for change, before they realized the need to reduce the “Margin” and the LO comp. it was reduced by .25% on the Margin and LO comp, which in turn provided or allowed us to offer more competitive rates to our Clients. It was funny to watch how production started to increase in our office and more loans were being closed, after this change was made.
Need to get on board and get rid of that Bulldog shirt. Go Tech!!
I completely agree, either make the comp the same for everyone or eliminate the comp rule all together. The insurance industry is structured so agents quoting the same product with the same company (e.g. Nationwide vs. Nationwide) charge the exact same premium to the customer. This somewhat takes price out of the equation when consumers shop. On the flip side consumers and LO’s lose control…. It’s a tough one.
Just about the dumbest idea you guys have come up with. The original idea was to avoid discrimination in loan pricing. The problem with is is that it also prohibits loan officer from charging a higher percentage on smaller loans, making them more worthwhile to do. The Minimum compensation helps, but if you are doing loans from $50K to $5M a percentage plan really isn’t very good. LOs cant’ choose a different percentage for different loan sizes, but Banks do it all the time. BTW at Big Bank- the most sued bank in the country-LOs were allowed to vary pricing slightly to compete. I think the leeway was up to a half point. This did not affect LO comp though, and above .25 point it had to be approved. I think this was a good practice. (Good luck trying this with wholesalers.) Brokers are able to shop rates between lenders to have essentially have the same effect. Bottom line, the current setup doesn’t suck as bad as many people think, unless you get a run of small loans and you have set your comp with all your lenders to compete for large loans.
100% finally a great analysis, one that is correct in nature. So many other yahoos on here that I wonder how they even close a single loan. It’s like giving guns to a infant hopefully he/she will learn how to use it just because a parent hands it for his household to be considered everyone’s armed. Every LO & their company needs a mechanism to determine when & how credits should be given without being penalized freely
Frank and Brian are correct, all LO comp should be market driven, but If they are not going to repeal the whole LO Comp law, then, by all means, pass the ability to lower rate to be competitive law. It will effectively create a free market because no consumer will pay you five points unless they have a very complicated transaction with a very low loan amount. This will allow the loan officer to compete on Jumbos as well as work the small loans that get ignored now. With a comp rate set at 1.5% who could work an 80K loan? But you can’t work Jumbo 700K loan at 1.5 either and be competitive. But as you said if we can set our comp high and then adjust it as the situation warrants, it will be as if there are no limits. Before there was the LO Comp law, most lenders restricted the Lender paid premium to 3%, the only time this was ever made was on very small loan amounts, otherwise we would not work these loans, as evidenced by the current LO Law, we do not work these loans, they are not profitable.
foolishness, the last go around screwed over LO’s and Consumers. higher fees, higher rates and less LO compensation. the money went upstairs! go back and look, the loan apps took a nose dive after those changes and the feds pump more money into loan purchasing. it was a bank bailout, same with the HARP refi programs.
Gun control? What is this Australia? Or America?
Make L O Comp all the same? Is this Russia Cuba Venezuela?
My job is to make my phone ring. Competition is what every business person wakes up for.
If all your going to want in a loan is price, go online and give all your financial information on your self to someone who might be in the Philippines or Africa. Who knows gentleman, the kingdom may have a check with your name on it for 30 million. As Frank says its a ground war. I’m taking my Barrett 50 cal with 10 round clip and I’m going to pick off everything in my scope, including Zillow everytime they do a flyby in the cloud above me.
I can bet tomorrow’s story on zillow should be fun.
This job is about making my phone ring by people who want and can payback a loan. If I don’t do my job I’ll need to sell cell phones cars or real estate.
Yes, great idea, have all compensation clearly disclosed to the borrower. The cap on broker comp has made it difficult to serve lower priced home purchasers, I assume the very target the comp cap intended to protect.
Hi Guys.. Love your show! Speaking for the other side I am director of a mortgage division for a small bank. We are not able to allow LO’s to cut their comp to win a deal. NO one can… They would gladly do so if allowed and we would be willing to share the pain to win a deal. So we (the bank) have been taking the hit to win deals. 1st Qtr and 4th Qtr it was common. We cut our margins to keep the deals coming in. This created several occasions where the bank made next to nothing but the LO still made full Comp. I think a LO should be able to cut their comp to win a deal. I would rather do that then tell an LO we cannot do the deal since the bank will make $ 0.00. We are far from greedy here. It should be the concern of every LO that whoever you work for is able to make $$ and keep the doors open. Comp does have its impact on rates and there is no way around that. So if you want to win a deal or beat a online call center lender where their comp is nothing compared to yours… what other options could there be?
Who do you think wrote DoddFrank and the LO Comp rules. The biggest contributor was your favorite…Wells. But remember when we sold a higher rate, LOs only “shared” that overage, normally. So the “bank” IS losing revenue when a lower rate is being sold into the secondary. The bank with a 350 bps net margin are screwing the consumer more than all the LO combined in the 2000s.
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