Reverse

Originating: Leveling the Playing Field

Written by Joshua Shein, as originally published in The Reverse Review.

The new compensation guidelines for loan officers have sent shockwaves through our industry. We spent months getting ready for it, attending meetings, conference calls and webinars to learn how to best make the transition. Yet there was no way to know the full impact until the guidelines went into effect last month.  To a large degree, the changes have leveled the playing field. We are more in-tune with what our competitors are doing and everyone is earning their compensation the same way.

The upshot is that success for the originator will now boil down to just one thing: customer service. As we move to implement and adjust to this new way of doing business, the shock of change has been slightly less significant in our niche of reverse mortgages than in other areas. Still, it has been a major adjustment for everyone.

For larger banks, the transition was somewhat easier because many already had a pay scale similar to the one required by the new rules; salary and bonuses were tied to the volume of loans that originators were generating. Also, many big banks started implementing the new guidelines in March to get ahead of the game.

For direct lenders like Great Oak, much of March was spent talking to compliance attorneys, re-reading the guidelines, discussing with our peers and educating ourselves about the new changes, then putting together a plan on the best way to implement the changes within our business.

It wasn’t easy getting ready for the shift: The rules are not black and white, so there was constant modifying and tweaking as it came down to the wire. Even as the weeks have progressed since the implementation date, many continue to make adjustments and changes as unforeseen scenarios and circumstances arise. That said, smaller lenders like us have the advantage of being more nimble. With fewer layers to go through as we put our plan into action, we are able to make adjustments as necessary.

Now that everything is in place, our challenge will be to help our loan officers adjust to the new way of doing business and what it means for their income. Gone are the days of big money on a single loan; the originator now has to focus on volume of loans and service, not fees on any single transaction. The incentive has shifted to closing a higher volume of loans, and it’s an adjustment for some of the successful loan officers in the reverse mortgage industry who were used to the high premiums of the past.

We are just now starting to see the effects of this, with April loans closing and the first round of paychecks under the new guidelines being handed out. As loan officers see their new paychecks for the first time, they are starting to understand the long-term implications of the changes. Some of these originators may still be in for a surprise as they crunch numbers moving into the summer months.

With this in mind, some loan officers have left the industry and many smaller brokers and lenders have closed because they have determined that the new pay scale will not be financially viable over the long term.

However, there is still money to be made in this industry, and these new guidelines put us all on the same level. Big or small, we are all paid the same way now. Everyone is much closer together in terms of earning power, and we all have a better sense of how our peers and competitors are operating. In the long run, the guidelines may make it easier to retain talent as well.

Now, it all comes down to customer service. We can honestly tell our customers that we aren’t making money off of the fees they pay and that we just get paid for closing loans. This allows borrowers to rest a little easier and choose a lender based on where they will get the best service.

In the end, the new guidelines will allow lenders to focus less on fees and more on customer service and customer relationships.  It’s a game-changer for the industry and a win for our customers.

 

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