MReport December 2021

TheMReport β€” News and strategies for the evolving mortgage marketplace.

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42 | M R EP O RT O R I G I NAT I O N S E R V I C I N G DATA G O V E R N M E N T S E C O N DA R Y M A R K E T THE LATEST ORIGINATION What Factors Impacted Q3 LO Compensation? Loan originators saw a 2.44% decrease in per-loan commission rates in the third quarter, as purchase apps held steady, but refi apps tailed off. S impleNexus examined Q 3 data on individual loan originator (LO) compen- sation, and has found that originators closed fewer units and earned slightly less per loan, averaging 100.372 basis points (bps)β€”an overall 2.44% decrease in per-loan commission rates from 102.878 bps in Q 3 2020. Analysis of data showed that declining loan volume in Q 3 2021, when compared to Q 3 2020, pushed quarterly LO commission earnings down 17%. Over that same period, mortgage lenders increased loan processor staff- ing by nearly 25%, while funding fewer loans, driving the average individual processor incentive compensation down by nearly one-third. In terms of commission type, monthly refi commis- sions dropped 37%, accounting for much of the shortfall, while purchase loan commissions held steady, rising 2%. Lenders dialed down per-loan commission rates on refinances by 7.17%, from 95.210 bps in Q 3 2020, to 88.384 bps in Q 3 2021. Basis points paid out on purchase loans decreased 1.58%, from 109.838 to 108.102 in Q 3. "The heyday of ultra-low rates and enormous refinance volume is over, and compensation is starting to settle back to pre- pandemic levels. On the bright side, 2021 is still shaping up to be the second-highest produc- tion year in the last decade, with modest growth in the purchase market helping take the edge off declining refinance volumes," SimpleNexus EVP and General Manager Lori Brewer said. "We will be watching to see if lenders reduce headcount or take a more conservative approach to incen- tive comp to protect margin." For the study, SimpleNexus' LBA Ware team examined data from mortgage lenders who used the firm's CompenSafe through- out the third quarters of both 2020 and 2021. The data consisted of retail, first-lien production from LOs and loan processors with at least six funded loans during the three-month period beginning July 1, 2021, and ending September 30, 2021. Additional findings of the SimpleNexus study included: LOs averaged $2.2 million in funded volume per month in Q 3 2021, a decrease of 14.9% from Q 3 2020 ($2.6 million). Purchase volume funded by individual LOs increased 4% from $1.4 million in Q 3 2020 to $1.5 million Q 3 2021, and refinance volume declined 32% from $1.3 million to $0.9 million during the same period. LO staffing levels held relatively steady from Q 3 2020 to Q 3 2021, dipping just 2%. Simultaneously, loans funded per LO per month decreased 22%, with LOs in the sample set averaging 9.0 loans per month in Q 3 2020 versus 7.0 loans a month in Q 3 2021. Loan processing staffing grew 23% from Q 3 2020 to Q 3 2021, averaging 29% fewer loans per month in Q 3 2021 (15.2 units), compared to Q 3 2020 (21.5 units), marking a 33% decrease in quar- terly bonus compensation earned, from $3,201 per processor per month in Q 3 2020 to $2,140 in Q 3 2021.

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