The new loan officer compensation rules which takes effect today, April 1, have prompted the nation's two largest residential originators to overhaul how they pay their retail LOs by tying pay to sheer volume -- to a greater degree than ever before.
Confidential documents prepared by Bank of America Corp. and Wells Fargo & Co. for their respective sales forces and obtained by American Banker offer a window onto the new model. Various bonuses and incentives will be eliminated, though new ones have been added; in at least Wells' case, they are designed to encourage good customer service and sound lending practices. (American Banker is a sister publication to National Mortgage News.)
The Federal Reserve's compensation rules come on top of regulations that the U.S. Department of Labor issued last year that are forcing many banks to put loan officers on payroll instead of paying them solely by commission.
B of A's plan says the bonuses loan officers once received for originating loans to low-income borrowers will no longer be awarded. The additional 15 basis points that loan officers once received on government-insured loans also are being nixed.
Under Wells Fargo's plan, loan officers will now be receiving 43 basis points, not per loan, but rather for a monthly volume of up to $899,000. The rate rises with an increase in volume. At $1.9 million in monthly loan volume a loan officer will receive 63 basis points.
Bank of America's LO compensation is on a similar scale. On a monthly volume of up to $899,000, loan officers receive 50 basis points. And at $2 million a month, loan officers will receive 65 basis points.
Both banks also have new bonus features to replace the many rate-based incentives that they can no longer offer. Under B of A's plan, a loan officer who sells a minimum $20 million of loans annually is eligible for admission to a "President's Club," which comes with a bonus of 4 basis points. B of A loan officers who sell a minimum of $32 million annually are eligible for the Chairman's Club, an honor that comes with a bonus of 7 basis points.
A B of A spokeswoman said the lender is complying with the Fed's new requirements but refused to discuss the company's new loan officer compensation plan.
Wells Fargo's compensation plan provides loan officers with the opportunity to earn bonuses according to customer loyalty and loan file quality measures. The new bonuses offset the reduction to the base compensation rate and should let top performers earn the same money they were making before the rule changes, said a Wells Fargo spokesman.
For the full and complete story see the Monday paper edition of NMN.
