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LO Compensation: The Overtime Debate

David Lykken
Dec 15, 2014

In the last decade, rulings surrounding the compensation of LOs have gone back and forth repeatedly. The compensation structure is complex for loan originators, and the difficulty lies in the extent to which they are working as salaried employees or commissioned employees. Should LOs be paid overtime, or should they be exempt?

Most recently, there is a discussion in the Supreme Court about the process that lenders have taken in adjusting the compensation of their loan officers under the most recent rulings. The MBA is arguing on behalf of lenders that the loan officer should be able to be classified as exempt from overtime, but many LOs don't necessarily see it that way.

It's a tricky issue. In the end, I think it all depends on what we expect out of our loan originators--and what the loan originators expect out of themselves. Are LOs to be seen as salespeople--or just regular employees? Should LOs be compensated for their production ... or for their time?

Different organizations have different values when it comes to how salespeople should be compensated. In different industries, there are different standards for the mix of salary and commission. But, in the mortgage industry, I think that if an LO is commissioned on any level, paying out overtime may produce the wrong incentives. Should LOs be compensated for staying in the office longer ... or for being more productive with they time that they're there?

I don't know. It's not an easy question to answer, but it will interesting to see what happens in the current debate. Everyone in the industry needs to keep their ears to the ground on this one.

David Lykken is 40-year mortgage industry veteran who has been an owner operator in three mortgage banking companies and a software company. As a former business owner/operator, today David loves helping C-Level executives and business owners achieve extraordinary results via consulting, coaching and communications, with the objective of eliminating corporate dysfunction, establishing and communicating a clear corporate strategy while focusing on process improvement and operational efficiencies resulting in increased profitability. David has been a regular contributor on CNBC and Fox Business News and currently hosts a successful weekly radio program, “Lykken on Lending,” that is heard each Monday at noon (Central Standard Time) by thousands of mortgage professionals. He produces a daily one-minute video called “Today’s Mortgage Minute” that appears on hundreds of television, radio and newspaper Web sites across America. He may be reached by phone at (512) 501-2810 or by e-mail at [email protected]


Dec 15, 2014