How do you determine what you can pay a loan officer?
As a branch manager or owner of a mortgage office hiring loan officers is (or should be) an ongoing process. In that process the compensation question is always one of the most important pieces.
Since the compensation rules have changed it is not as easy as it used to be to determine. Before the comp rules went into effect most managers had a split fee agreement with their loan officers. If they brought in X in fees they received X percentage as a commission.
Now it’s all about the BPS (basis points) or it should be.
The place to start is to look at your offices historical numbers.
What is your total loan volume for a given period.
What are the gross fees that your office generated from that volume.
What does that represent in BPS.
If your office generated $12,000,000 in loan volume in the most recent 6 months, and generated $420,000 from that production, your office grossed 350 basis points (3.5%) per loan.
Now you need to do the same thing with your overhead – convert it to BPS.
For the same period what was your total cost of operation (not counting commissions) including all salaries?
Now do the same calculation for the same period to determine what you have paid your loan originators in BPS.
The amount that is left after you have deducted overhead and commission is the offices net represented in basis points.
Having a working understanding of your mortgage loan production numbers represented in BPS will also help you determine if your mortgage rates and fees are set correctly.
The next post – part 2 will cover how to use these calculations to determine what you should be paying loan officers.