In part one of this article I outlined the importance of breaking out all revenue and costs into BPS. Why is it important to view your mortgage branch business this way?
Because it give you an additional perspective besides using dollar amounts. Because you pay your loan officers using basis points it makes sense to use the same comparison for all income and expenses. You may net $500 on one loan and $1000 on another, looking at revenue and expenses in BPS is – at least to me – a better way to understand your costs and profit.
To understand and project targeted goals for profitability using BPS to set goals for loan officers, overhead, and revenue allows you to identify strengths and weakness and make adjustments.
How can you use this information to determine the right compensation for your loan officers?
For existing loan officers you can review their previous production and compensation to determine if they are carrying their weight.
Using a BPS cost breakdown on a loan officers previous production can reveal a lot.
For potential LO’s doing a cost / benefit analysis using BPS can be very helpful comparing companies.
What is the gross, costs ( processing, third party costs, operating expenses), and commission, in BPS historically for the LO?
I hope this information gives you some ideas that you can use evaluating your employees an your personal production.
Comments and questions are always welcome.