Wells Fargo ups commissions to spur loan production

Increases loan officers' pay in effort to counteract declining volumes

Despite seeing an increase in loan originations in the second quarter, Wells Fargo’s (WFC) loan production volume has been falling as the refinance boom has cooled.

In advance of Wells Fargo releasing its second quarter earnings last month, Kroll Bond Rating Agency wrote in its Q2 2014 Bank Earnings Preview that the large banks may be forced to change the way operate in the face of decreasing mortgage activity.

In its report, KBRA wrote that Wells Fargo may find it “difficult” to turn a profit in the current environment. “Given the decline in mortgage lending volumes experienced by WFC and other large banks, as well as the zero-rate policy of the FOMC, it may be difficult for the bank to deliver positive revenue growth in 2014 and beyond.”

But Wells Fargo has decided not to sit on its hands and has taken steps to increase its diminishing loan volume. According to a report from Bloomberg, Wells Fargo has increased its loan officers’ top commission rate to 70 basis points, up from the previous commission rate of 63 basis points. The changes took effect on July 1.

That means an employee who completes $1.6 million of loans in a month would earn a base commission of $11,200, up from $10,080.

“By adjusting those tiers we created a lot of desire for the loan officers to go out and get that extra production,” Franklin Codel, who oversees mortgage origination for San Francisco-based Wells Fargo, said in a phone interview. “This creates that little extra incentive.”

Bloomberg also reports that the new plan increases the commission rates on the lower tiers of its production scale.

The new plan also merges two lower tiers into one that pays 65 basis points rather than 48 or 58. So loan officers who handle $600,000 would earn a base commission of $3,900.

According to the Bloomberg report, Wells Fargo loan officers must complete or refer at least nine loans during a month or bring in $1.6 million in loans to achieve the highest commission level. Under the previous plan, the minimum threshold of loans to achieve the highest commission rate was 11.

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