Loan officer wallets flatten as refis dry up

As refi volume dries up, loan officer commissions have too, declining by 17% year-over-year

To the surprise of virtually no one, loan officer commissions started to head south in the third quarter, dropping 17% year-over-year, according to SimpleNexus’ third quarter mortgage loan compensation report.

The reason? Yep, you guessed it: waning refi volume.

From July to September, monthly refi commission dipped by 37%, whereas monthly purchase loan commission rose by a slight 2%, the report found.

Concurrently, per-loan commission rates have started falling, decreasing to 100.372 basis points in Q3 2021 from 102.878 bps in Q3 2020, a 2.44% decline, SimpleNexus said.

The report added that lenders on average have started to “dial down” per-loan commission rates on refis by 7.17%, to 88.384 bps in the third quarter of 2021 from 95.210 basis points in Q3 2020.

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On the purchase loan side of things, per-loan commissions also took a dive by 1.58% year-over-year, to 108.102 bps in Q3 2021 from 109.838 bps in Q3 2020.

The report also stated that LO funded volume per month stumbled to $2.2 million, a decrease of 14.9% from the third quarter 2020. Refi volume funded by individual LOs declined to $0.9 million in Q3 2021 from $1.3 million in Q3 2020, a 32% drop. At the same time, purchase volume increased 4% to $1.5 million in Q3 2021 from $1.4 million in Q3 2020.

“The heyday of ultra-low rates and enormous refinance volume is over, and compensation is starting to settle back to pre-pandemic levels,” said Lori Brewer, EVP and general manager at SimpleNexus, which recently acquired her former company, LBAWare.

On a happy note, Brewer remarked that “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.”

Meanwhile, loan officer staffing levels have remained steady year-over-year, falling by a mere 2%. Production-wise, LOs averaged 7.0 loans per month in Q3 2021, versus an average of 9.0 loans a month during the same period last year.

On the other hand, loan processor staffing grew 23% year-over-year, SimpleNexus said. Loan processors averaged 29% fewer loans per month in the third quarter, “fueling a 33% decrease in quarterly bonus compensation earned from $3,201 per processor per month in Q3 2020 to $2,140 in Q3 2021.”

The dissonance between an overcrowded workforce and falling loan volume could spell layoffs in the future.

“We will be watching to see if lenders reduce headcount or take a more conservative approach to incentive comp to protect margin,” Brewer said.

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