What Does the Way You Pay Say?

If you’ve read the blog, you know I am a big advocate of Credit Unions hiring full-time, professional originators. They are needed to develop relationships with Realtors and drive volume to Credit Unions. It’s crucial as we look to capture that elusive 3% more of the market to reach a 10% market share goal. So what does the way you pay your mortgage originators say about your efforts to be memberlicious?

If you believe that incentives and commissions drive behavior, your pay practices for mortgage originators must not only be competitive in the market, but they must match your Credit Union’s values.

Generally, I’ve seen three approaches on how mortgage loan originators are paid.

1. Pay a reasonable pay salary. This is great for the Credit Union and is fair to the borrower. It fixes the salary related costs of mortgage lending regardless of volume. But is it sufficient to attract mortgage talent? I would argue that it does not. Mortgage originators are often sales people and the best sales people often have some level of motivation associated with money. Under this pay plan, as they produce more loan volume, they still earn the same money. The Credit Union wins because of more loans and members win because more get low-cost financing for their home, but the loan originator actually loses. Paying all originators basically the same creates no incentive for helping more members and will only attract and keep average loan originators.

2. Pay a commission based on loan volume. This is the most common approach in the mortgage industry. Usually, there are payout tiers. If a loan officer closes up to a $1 million in a month, they earn a certain basis point level. Once they cross that threshold, the basis points go up. The more loan volume in terms of dollars an originator produces, the more they earn. A $250,000 loan is worth more to them than a $100,000 mortgage. To get to the higher basis point level, they can close four $250,000 or ten $100,000 loans. Which one is easier to get to? What are you incentivizing? You are pushing your originators to seek out bigger loans. And does that stay true to Credit Unions mission of helping members of modest means?

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