LO Compensation Dropped in Q3 as Refinance Volume Waned

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Waning refinance volume in the third quarter resulted in a 17% year-over-year decrease in average compensation earned per LO, SimpleNexus’ Q3 2021 Mortgage Loan Compensation Report shows.

“The heyday of ultra-low rates and enormous refinance volume is over, and compensation is starting to settle back to pre-pandemic levels,” says Lori Brewer, EVP and general manager of SimpleNexus, in the report. “On the bright side, 2021 is still shaping up to be the second-highest production year in the last decade, with modest growth in the purchase market helping take the edge off declining refinance volumes. We will be watching to see if lenders reduce headcount or  take a more conservative approach to incentive comp to protect margin.”

LO Compensation Dropped in Q3 as Refinance Volume Waned
Source: SimpleNexus

Originators closed fewer units and earned slightly less per loan, averaging 100.372 BPS, leading to lower monthly commission earnings, according to the report, which is based on data from the CompenSafe ICM platform.

During the one-year period, mortgage lenders increased loan processor staffing by roughly a quarter while funding fewer loans, driving average individual processor incentive compensation down by a third.

Monthly refinance commissions in the third quarter decreased 37%, accounting for most of the shortfall, while monthly purchase loan commissions held relatively steady, rising just 2%.

Overall, LOs saw a 2.44% decrease in per-loan commission rates from 102.878 basis points (BPS) in the third quarter of 2020 to 100.372 BPS in the third quarter of 2021.

Notably, lenders dialed down per-loan commission rates on refinances by 7.17%, from 95.210 BPS in the third quarter of 2020 to 88.384 BPS in the third quarter of 2021.

BPS paid out on purchase loans decreased 1.58% from 109.838 to 108.102.

Photo: Giorgio Trovato

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