One Month Post-LO Comp Changes, Industry Reacts

With the implementation of the Federal Reserve Board’s new loan officer compensation rules now one month behind us, we decided to see how the reverse mortgage industry is adapting to the changes. It may be too soon to tell for some, but others are definitely seeing the impact on their business.

We asked several reverse mortgage professionals to respond to the question:

One month after implementation of the Loan Officer Compensation Rule, how is your business faring?*

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Here’s what they had to say.

“Operating as a broker, we were previously able to offer homeowners a lower cost HECM than many providers because we could pick up some borrowers’ costs in many cases. But the new compensation regulations have eliminated our ability to do this. How this aspect of the new regulations makes sense, I have no idea.”

—Lance Jackson, President & CEO, Castle Financial – Reverse Mortgage Experts

“Our loan officer compensation plan is getting redone right now for the second time. The first time we thought we had it all laid out, but there have been compliance issues. We’ve gone from four pages to 11 pages. It has been the biggest thorn and nobody’s 100% crystal clear on it. I cannot tell you the amount of energy and effort that have gone into this. It should have been done on a smarter level collectively, for some of the smaller industry players. We all should have gotten together collectively and had somebody on the job to get the guidelines, verbiage and interpretation together.”

—Ron Kamler, President, California Reverse Mortgage Consultants

“Like all companies, we’ve had to make significant adjustments to our compensation plans, but I have not seen any negative feedback as it pertains to the retail production side. The impact is going to be more visible on the wholesale side.”

—Sarah Hulbert, Retail Business Development Manager, 1st Reverse Mortgage USA

“We’ve spoken with several originators across the U.S. regarding the Loan Officer Compensation Rule. What we’ve heard is compensation to individual loan officers has not been significantly impacted in a negative way as many had anticipated. It appears the real changes have taken place behind the scenes with lenders revising their compensation plans to be compliant with the rule. I would be surprised if we hear from our members with reports of decreased commissions or a drastic reduction in overall production due to the new rule alone—market forces are challenging enough and it is expected that a substantial change in compensation for mortgage professionals at such a time would be met with skepticism.”

—Shannon Hicks, VP of Product Development, Reverse Fortunes

*Feel free to leave a comment below and tell us how your business is faring under the new rule.

 

Written by Elizabeth Ecker

 

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  • This, like all government regulations did nothing to help consumers. Instead it has cost them. Now we have mandatory lender origination fees. It has eliminated competition. It did not reduce steering, but will promote it. When pricing goes up during the month, the LO doesn’t get to participate because our pay plans stay the same for a month. That could cause LO’s to delay loan closings until following month.

    • Great points. But it has not eliminated competition – it has only tied the hands of the smaller providers to compete. Wells Fargo and MetLife retail are now able to out-manuever us with regard to closing costs, as evidenced by their $0 Origination Fees.

    • Great points. But it has not eliminated competition – it has only tied the hands of the smaller providers to compete. Wells Fargo and MetLife retail are now able to out-manuever us with regard to closing costs, as evidenced by their $0 Origination Fees.

  • I just closed a loan under the old compensation plan. I made $2500 in origination and $1600 in overage. If this were originated under the new compensation plan I could make $2500 if I chose borrower paid compensation. That is a 35% reduction in pay. The numbers don’t lie. If you originate loans under $100,000 your commission will be cut dramatically. Last year at this time I was waiving most of my origination fees because I was making very good money off the overage from the rate. Those days are gone.
    Those of us originating loans in areas hardest hit by the real estate decline will suffer the most and fall out from the new compensation rules and will not allow us to help the homeowners the way we did in the past. I work with many seniors facing foreclosure. Originating reverse mortgages for seniors facing foreclosure is much more work and time intensive than originating a standard reverse mortgage. I have worked with homeowners for up to a year negotiating short payoffs and eliminating junior liens. I have not become wealthy doing this but I made enough money to justify the man hours involved.
    I considered this the best example capitalism offere. I was able to do a tremendous good for the homeowner while still making a decent living. The senior homeowners that need our help the most will also suffer the most. This is just SAD!

  • Up until now, this is one area I have tried to stay out of. One thing this article and thread points out is that at this early stage the results of the Fed Reserve comp rules are about as clear as mud.

    Rushing to conclusions so early is a trap our industry seems to practice all too frequently. No doubt the rule will be modified over time.

    Despite the admonition regarding rushing to conclusions, it is important that all sides be heard. Just the other day I had a loan officer call me excitedly telling me how he had made over 250% more on his latest HECM transaction under the rule than he had on any deal so far this year!!

    It is time to take a hard look at the rule and begin looking at its financial effect on the industry as a whole and then at each level of employment divided between lenders, branches, and brokers. That would be an interesting study, One that based on the comments and statements in the article above might just surprise the majority in the industry including yours truly.

  • The new compensation rule does not help the consumer at all, if anything it hurts them. The new rule will put the small broker out of business eventually. It also deals a bum rap for the firm a year ago that had its FHA approval, closed and underwrote the loan and in some cases had the ability to fund out of warehouse lines. Today, that same company because of the new financial net worth requirements may now have to deal as a broker or under a Hybrid program.The new comp rule was a bad move by people who do not understand how our industry works. Our government over the past two years has regulated to death the entire lending industry including the banking industry.Our government is creating regulation after regulation at a rate like a copy machine on full throttle! They don’t have a clue what they are doing! However, they are going to achieve maybe one of the goals they have in mind. That goal is to have the industry dominated only by the large and the few.Socialism is moving fast into our financial world, capitalism is fading right before our eye’s my friends. I am very fearful what this will do to our industry. We may wind up seeing good people that cared about our senior’s and took the time and patients with our seniors, leaving the business.I see this industry becoming more fast pace and one that may be only concerned about volume to make up for what is and will be lost under the new comp program. I am saddened about what our politicians and bearcats are doing to our seniors and good career committed loan officers.Good day all,John A. Smaldone

      • Lance,

        Your comment is interesting since you have seemed at worst neutral on the appointment of Ms. Warren to head up the CFPB. Most conservatives oppose her confirmation while you seem to have always maintained a somewhat neutral position (in posts on RMD) even verging on endorsing her. From what I understand she supports this move by the Fed.

        Nothing critical, just an observation.

      • You’re right, good memory Zorro. When I commented on her a few months ago, it was in reference to a comment I heard her make about loan disclosures being cumbersome and difficult to understand, which I didn’t disagree with. That seemed reasonable to me and she presented herself well on that interview, and at the time that was the only knowledge I had of her.

      • Lance,

        How do you like Ms. Warren now? On second thought you may not want to answer that one.

        How silly of me? I forgot my real name.

        Signed,

        (The real) ZORRO (per Lance Jackson)

  • if thats true Wells Fargo and MetLife retail are now able to out-manuever us with regard to closing costs, as evidenced by their $0 Origination Fees. Then we will all be out of business in 24 months

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