SimpleNexus has examined Q3 data on individual loan originator (LO) compensation, and has found that originators closed fewer units and earned slightly less per loan, averaging 100.372 basis points (bps)—an overall 2.44% decrease in per-loan commission rates from 102.878 bps in Q3 2020.
Analysis of data showed that declining loan volume in Q3 2021, when compared to Q3 2020, pushed quarterly LO commission earnings down 17%. Over that same period, mortgage lenders increased loan processor staffing by nearly 25%, while funding fewer loans, driving the average individual processor incentive compensation down by nearly one-third.
In terms of commission type, monthly refi commissions dropped 37%, accounting for much of the shortfall, while purchase loan commissions held steady, rising 2%. Lenders dialed down per-loan commission rates on refinances by 7.17%, from 95.210 bps in Q3 2020, to 88.384 bps in Q3 2021. Basis points paid out on purchase loans decreased 1.58%, from 109.838 to 108.102 in Q3.
"The heyday of ultra-low rates and enormous refinance volume is over, and compensation is starting to settle back to pre-pandemic levels. On the bright side, 2021 is still shaping up to be the second-highest production year in the last decade, with modest growth in the purchase market helping take the edge off declining refinance volumes," said SimpleNexus EVP and General Manager Lori Brewer. "We will be watching to see if lenders reduce headcount or take a more conservative approach to incentive comp to protect margin."
The Mortgage Bankers Association (MBA) reported this week that the refinance share of overall mortgage application volume decreased to 61.9% of total applications from 62.2% the previous week.
For the study, SimpleNexus' LBA Ware team examined data from mortgage lenders who used the firm’s CompenSafe throughout the third quarters of both 2020 and 2021. The data consisted of retail, first-lien production from LOs and loan processors with at least six funded loans during the three-month period beginning July 1, 2021, and ending September 30, 2021.
Additional findings of the SimpleNexus study included:
- LOs averaged $2.2 million in funded volume per month in Q3 2021, a decrease of 14.9% from Q3 2020 ($2.6 million).
- Purchase volume funded by individual LOs increased 4% from $1.4 million in Q3 2020 to $1.5 million Q3 2021, and refinance volume declined 32% from $1.3 million to $0.9 million during the same period.
- LO staffing levels held relatively steady from Q3 2020 to Q3 2021, dipping just 2%. Simultaneously, loans funded per LO per month decreased 22%, with LOs in the sample set averaging 9.0 loans per month in Q3 2020 versus 7.0 loans a month in Q3 2021.
- Loan processing staffing grew 23% from Q3 2020 to Q3 2021, averaging 29% fewer loans per month in Q3 2021 (15.2 units), compared to Q3 2020 (21.5 units), marking a 33% decrease in quarterly bonus compensation earned, from $3,201 per processor per month in Q3 2020 to $2,140 in Q3 2021.