LBA Ware: 2019 Base Commissions for LOs Unchanged
LBA Ware, Macon, Ga., released its 2019 Loan Originator Compensation Report, finding, base commission for LOs effectively unchanged from 2018 to 2019 despite increased industry focus on cost reduction.
The firm’s analysis of year-over-year data from its CompenSafe ICM platform reveals “compelling trends” about how mortgage lenders nationwide are managing commissions for loan originators, said LBA Ware Founder and CEO Lori Brewer.
The report said its sample group funded significantly more loans in 2019 than 2018, with total number of closed loans up 18.28% and total loan volume up 29.44% year-over-year. Together, these unit and volume gains resulted in an additional 31.42% in LO commissions paid in 2019 vs. 2018.
The average base commission earned by LOs in 2019 was 93.912 basis points, on par with 2018’s average of 93.114. After accounting for commission tiers and minimum/maximum caps, LOs earned an average of 102.089 basis points per loan in 2019 compared with 2018’s average of 100.594 basis points, an average increase of 1.49 basis points per funded loan.
The average 2019 loan amount was $259,652, up 9.43% year-over-year. This higher average loan amount helped push the average LO commission per loan from $2,332 to $2,591 (an 11.11% year-over-year increase).
The report said loan originators continue to account for the lion’s share of compensation expenses, with LO commissions totaling 69% of lenders’ total incentive compensation expenditure.
However, the report said overall LO employment was nearly flat for its sample group from 2018 to 2019, with the total number of LOs on payroll down just 0.14% year-over-year.
“Despite speculation that lender efforts to reduce operational costs would include curbing loan originator commissions in 2019, our analysis shows that base commission for LOs did not significantly change from 2018 to 2019,” Brewer said. “This data implies that lenders may not get serious about reducing LO commissions until they’re in significant financial pain, which isn’t predicted to happen until later in 2020, when refinance volume is expected to wane.”
LBA Ware reviewed account data for mortgage lenders that used CompenSafe to automate incentive compensation management for the full calendar years 2018 and 2019. The controlled, sample dataset consisted of retail, first-lien production from LOs that funded at least six loans in one of the calendar years. The LO commissions were for a wide range of large and small lenders across the United States, comprised of 68 percent independent mortgage companies, 27 percent banks and 5 percent credit unions.