Originator commissions drop annually as headcount rises in Q2

Originators and their teams saw individual compensation fall between April and June compared to the unusually strong second quarter of 2020 as work-intensive purchase loans increased and hiring jumped, LBA Ware found.

Second-quarter commissions per loan originator fell 6% year-over-year, even though lending generally increased marginally during the quarter, according to a recent study by LBA Ware. Average monthly purchase volume per loan officer grew 49% from the second quarter of 2020 to more than $1.5 million. The equivalent number on the refi side slipped 36% to $900,000.

Although per-LO incentive compensation tends to be higher for purchase loans, the amount slipped year-over-year for both that category (108 basis points vs. 109) and refinances (92 vs. 99). Increased headcount and a slight drop in loan volume per individual despite the larger gain in originations may have contributed to the annual drop.

Processor staffing rose 49% annually and the average worker in that category handled 27% fewer loans. Per-processor bonus compensation slipped to $1,999 per month from $2,684.

The fact that the purchase-refi mix and rate trends have varied since the second quarter ended needs to be factored into an analysis of what the future implications of these numbers are, but so long as consumer sentiment remains steady, they generally suggest 2021 could be one of the better years for the business, even if incentive compensation wavers a little.

“This is still a banner year for mortgages,” LBA Ware Founder and CEO Lori Brewer said in an interview on Thursday. With overall commissions averaging a little over 101 basis points, they’re down from closer to 103 a year ago, but still within the range normally paid to LOs, she said.

While the latest numbers suggest origination volumes may be steady through the rest of the year, the pace of hiring may not be. Monthly increases in nonbank mortgage employment estimates recently showed signs of faltering for the first time since rates first dropped in the wake of the pandemic. LBA Ware’s numbers don’t necessarily confirm this but the surge in processor hiring is notable, Brewer said.

Numbers in the study reflect a controlled, anonymized sample set of account data from nonbank and depository mortgage lenders who used LBA Ware’s technology to track incentive LO and processor compensation for retail-originated first-lien loans. Only LOs and processors who handled at least six funded loans were included.