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Home appraisal’s ugly history and uncertain future

This is Part I of a deep dive into the home appraisal industry. Today we explore the origins of the appraisal industry and its current lack of diversity.

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Loan officers made insane money in Q4 2020

Average LO handled $2.6M in volume during the fourth quarter

Over $4 trillion in originations made its way through the housing market last year, and new data from mortgage software firm LBA Ware revealed that by the end of 2020, loan officers played every last card in their deck to get those deals closed by New Years.

Total funded loan volume by loan officers in Q4 2020 increased 106% from the fourth quarter of 2019, a data analysis by the software firm found.

To handle all that volume, lenders and broker shops grew LO headcount by 27% year-over-year. Even with more LOs battling for all those sweet originations, the average LO managed to produce $2.6 million per month in volume in the last quarter. That’s a 63% increase and a whopping million dollars more per person than seen in Q4 2019. It’s also flat sequentially from the prior quarter, where $2.6 million was the production average.

Despite per-loan compensation decreasing 0.2% year-over-year, LO pockets remained full due to the phenomenal increase in volume.

“Low interest rates flamed an increased demand for mortgage activity, which in turn benefited LOs and processors,” said LBA Ware Founder and CEO Lori Brewer. “They were rewarded for their long hours with robust compensation checks.”

Mortgage Tech Demo Day

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Amid all that production, LOs saw purchase volume grow 71% annually, averaging $1.35 million in funded purchase loans in Q4. However, refis, driven by weeks upon weeks of record low mortgage rates, accounted for 51% of all the volume LO’s funded, and soared 158% from the same time in 2019.

As rates are predicted to rise in 2021 (and possibly for years to come), Brewer said LOs should prepare for the influx of refi commissions to begin to subside.

“As rates are predicted to rise in 2021 and for several years to come, loan teams that wish to maintain their earnings would do well to put a strategy in place that enables them to offset waning refi volume with more purchase volume,” Brewer said.

On average, LOs funded $20.4M in annual volume in 2020 overall, with transactions split evenly at 50% purchase loans and 50% refinance loans.

The LOs also had a lot more help to process those loans than they had in the past (which also drives up the lender’s cost to originate the loan).

According to Brewer, processor headcount increased 51% year-over-year. And they cumulatively handled 99% more loan files compared to Q4 2019. Per-loan bonus compensation earned by processors rose 21% to $128 per loan in Q4 2020 ($106 in 2019), earning processors an average production bonus of $2,503 per month ($1,569 in 2019).

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