Our Q2 2021 Loan Compensation Report provides a snapshot of how loan originator (LO) compensation, loan processor compensation, and staffing has evolved under unique circumstances since the refi market shot off last year (for comparison, read our Q2 2020 report here.) Here's a look at the top findings from this quarter's report.
Key Takeaways from the Q2 2021 Loan Compensation Report
- With more shoulders to share the load, per-LO volume and commissions dipped
Lenders hired additional LOs during the past year. With 5% more originators sharing the workload, each individual LO produced 10% fewer units a month in Q2 2021 than in Q2 2020. As a result, loan volume per LO decreased 4% and commissions per LO dropped 6% compared to the same period last year.
- Purchase volume surged
Nevertheless, LOs had a great quarter, nearly managing to keep pace with a record-setting Q2 2020. Purchase volume grew 49% year-over-year, meaning lenders funded three purchase loans in Q2 of this year for every two purchase loans they funded in Q2 of 2020. This could signal the start of a long-anticipated shift to a purchase mortgage market.
- Loan commission rates declined, especially for refis
LOs saw a 1.76% decrease in overall per-loan commission rates from 103.119 basis points (BPS) in Q2 2020 to 101.308 BPS in Q2 2021. Refis took the biggest BPS hit, averaging 91.679 BPS, a significant 6.94% decrease from the 98.517 BPS they garnered in Q2 2020.
- As processing teams got beefier, individual processor bonuses shrank
Over the past year, lenders have been on a loan processor hiring spree, as evidenced by processor staffing increases of 49% from Q2 2020 to Q2 2021. This lightened the workload per processor by 27%, with processors handling an average of 15.7 loans a month in Q2 2021 versus 21.7 loans a month in Q2 2020. And because processors are paid on units rather than volume, quarterly bonus compensation earned was down 26% from $2,684 per processor per month in Q2 2020 to $1,999 in Q2 2021.
When asked for her take on the situation, LBA Ware founder and CEO Lori Brewer offered the following: "LOs continue to benefit from a strong purchase market buoyed by low rates, flex work opportunities and millennials moving out of their parents' homes. If the macroeconomic environment stays strong for the second half of 2021, LOs could have another banner year."
"Another notable observation is that lenders added processing manpower at almost ten times the rate they added LOs in Q2," Brewer added. Lenders could be anticipating that the shift to a purchase market will require extra processing resources since purchase loans generally involve more paperwork than refis. Only time will tell if that level of operational staffing will be sustainable over the long term.