Loan officer average compensation flat even with increased volume

Mortgage loan officer compensation remained level year-over-year as an unexpected surge in originations surprised employers expecting it to be a down year, an LBA Ware report said.

"Despite speculation that lender efforts to reduce operational costs would include curbing loan originator commissions in 2019, our analysis shows that base commission for LOs did not significantly change from 2018 to 2019," said LBA Ware CEO Lori Brewer in a press release. "This data implies that lenders may not get serious about reducing LO commissions until they're in significant financial pain, which isn't predicted to happen until later in 2020, when refinance volume is expected to wane."

Cost-cutting and employment reductions were supposed to be the norm during 2019, as interest rates were expected to rise. The economists for the Mortgage Bankers Association at its 2018 annual convention predicted $1.63 trillion in total volume for the following year. Instead, interest rates trended lower for most of the year, bringing in refinance business. Industry economists now expect 2019 to end with over $2 trillion in total volume.

As a result, the average number of loans closed in the study group was up 18.28% compared with 2018. In terms of dollar volume, it was up 29.44%. Taken together, those increases led to an additional 31.42% in loan officer commissions paid during 2019 versus the previous year.

The average base compensation rose just 0.8 basis points to 93.912 bps from 93.114 bps in 2018.

But after adjusting for compensation tiers along with minimum and maximum caps, average compensation increased by 1.49 bps to 102.089 bps in 2019 from 100.594 bps the prior year.

Because the average loan amount for 2019 was 9.43% to $259,652, the average loan officer's commission per loan rose to $2,591 from $2,332, an 11.11% year-over-year increase.

Commission is by far the preferred way for loan officers to be compensated. Nearly two-thirds of the respondents to the 2019 National Mortgage News Top Producers survey said it was extremely important to be paid by commission.

Just 21% attached any importance to receiving a base salary. Over one-quarter of the respondents said it was extremely important to them to receive an ownership stake in their company. The responses to the compensation questions on the survey were not mutually exclusive.

(NMN has opened the nomination process for its 2020 Top Producers survey)

Overall LO employment was nearly flat for LBA Ware's sample group that consisted of 68% independent mortgage companies, 27% banks and 5% credit unions; the total number on payroll was down by 0.14% year-over-year.

The most recent Bureau of Labor Statistics data put total nonbank mortgage industry employment at 335,300 for November, down from the year's peak of 336,600 in October. That was up from 332,000 in November 2018.

LBA Ware is a vendor that sells technology used to track loan officer compensation.