Wells Fargo's Plan for Slow Mortgage Market: Increase Pay!

Wells Fargo has apparently decided thatrna carrot is better than massive layoffs when the mortgage business starts tornslide.  Bloomberg is reporting that the bank, the nation’s largest mortgagernlender, quietly revised its commission structure for loan originators on July 1,rna move that should result in larger paydays. rnThe news service quotes bank executive Franklin Codel as saying thernchange “created a lot of desire for the loan officers to go out and get thatrnextra production.  This creates thatrnlittle extra incentive.”</p

Wells has increased the top commissionrnrate from 63 basis points to 70 and merged two lower commission tiers into arnsingle one that pays 65 basis points rather than 48 or 58.  The new rates apply to employees totalrnmonthly loan volume but is structured to define that volume both by number ofrnloans and by dollar value.  Thisrnstructure rewards both employees working in high cost markets where loans arernlarge and those working in areas where loans are smaller but perhaps morernnumerous.</p

To earn the top rate loan officersrnmust complete or refer a minimum of nine loans in a month (down from 11 underrnthe old structure) or bring in at least $1.6 million in loans.  The middle tier requires four to eight loansrnor $600,000 to $1.599 million in volume.  As of July an employee who closes $1.6 millionrnin a month will earn a base commission of $11,200, up from $10,080. Loanrnofficers who handle $600,000 would earn $3,900. </p

Refinancing, which once accounted forrnwell over 80 percent of all loan originations, has been winding down sincernrates increased in mid-2013 and currently makes up 54 percent of originationsrnaccording to the Mortgage Bankers Association (MBA).    WellsrnFargo’s refinancing volume is expected to be around $96 billion by the fourthrnquarter of this year, 75 percent below the level in the first quarter of 2013.</p

Lenders are trying to fill the gap inrnoriginations with home purchase mortgages. rnAs home sales gradually recover from the housing crash purchasernmortgages are on the upswing and may be a $195 billion business by late 2015, $80rnbillion more than in the first quarter of this year.  But home purchase lending is a more competitivernbusiness that requires closer ties to builders and real estate agents and morernnetworking.  Bloomberg says that largernlenders have recently seen loan officers defect to smaller firms that can closerndeals faster and offer more attractive pay packages </p

Bloomberg quotes MND Pipeline Press columnist Rob Chrisman aboutrnthe defections.  “If my contacts arernprimarily with realtors rather than bank depositors, I can take that businessrnanywhere.”  Chrisman pointed out that, “Somernof the guys who were purchase-oriented could make 50 to 60 basis points atrnWells Fargo or 120 to 140 at an independent shop.” </p

The bank has been tinkering with itsrncommission structure for a while.  In a Marchrn2013 attempt to speed up processing, it initiated a reward for submittingrncomplete applications packages for processing within five days. This April it increasedrnthe top commission an employee can earn on a single loan to $12,500 fromrn$10,000. The July version boosts the commission rate if employees garner toprnmarks for customer satisfaction. </p

The new adjustment is aimed atrnrecruiting and retaining staff, particularly above average producers.  It also focuses the higher payments of loanrnofficers who draw referrals for local real estate networks and raises thernincentive for referrals from other Wells Fargo employees.

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