Average Compensation Jumps 59% For Originators
How were your commissions in the second quarter of 2020? You’re below average if they weren’t up 59% over 2Q 2019. (Pat on the back if they were up over 60%.)
LBA Ware, a provider of incentive compensation management and business intelligence software solutions for the mortgage industry, today released summary statistics on the state of mortgage industry compensation in the second quarter of 2020. While things looked good, the company is advising originators to realize the money won’t keep flowing.
“In this year of bleak economic news, surging refinance volume and steady home purchase business have been bright spots. Low rates have fortified lenders’ pipelines and put more money in originators’ paychecks,” said LBA Ware founder and CEO Lori Brewer. “LO commissions paid out during the three-month period are up 59% over 2019. I just hope some of that hard-earned money gets set aside for the rainy days that are bound to follow expected increases in unemployment and loan defaults.”
Refinance transactions drove the market in Q2 2020, accounting for 56% of total volume funded in the quarter (versus only 21% of total volume funded in Q2 2019). LOs averaged $1.4M in funded refinance volume per month, an increase of more than 230% over Q2 2019
The paychecks definitely looked larger but they could have been even bigger if not for refinances capturing a bigger piece of the pie. The uptick in refinance production contributed to a 2.7% decrease in per-loan commissions from 108 basis points in Q2 2019 to 105 basis points in Q2 2020.
Refinance leads, LBA Ware says, are more likely to be company-generated versus self-sourced, so they tend to pay out at a lower rate than purchase loans, averaging 100 basis points in Q2 2020 compared to 110 basis points paid out for purchase loans.
Commissions earned by loan originators in Q2 2020 increased 59% from Q2 2019, because the average LO originated and funded 63% more volume in Q2 2020 ($2.4M per month) versus Q2 2019 ($1.4M per month). Purchase volume held steady year-over-year with LOs averaging $1.08M in funded purchase loans per month ($1.16M in Q2 2019) and receiving on average 109.9 basis points per purchase loan (109.7 in Q2 2019).