Is Your Comp Plan Restraining Your Income? (2 solutions if it is)

I recently attended a sales training for mortgage brokers by a colleague who polled the audience about their compensation plan.

Of the approximately 50 mortgage originators in the room, more than half were on a tiered platform that capped south of 100 basis points.

As the presenter so eloquently shared, if you’re earning less than 150 bps per deal, “you’re screwed.”

It’s true.

The volume you must produce to earn a strong six-figure income (which in my book is $250K or higher) is extremely difficult to attain consistently

Let’s do some math.  Let’s say your average deal volume is $150,000 and you’re earning 80 basis points per deal.  That means your average gross revenue/deal is only $1,200.  Even at 100 bps you’re still only at $1,500.

To get to $20K in gross earnings each month, at an 80 bps income threshold you’d have to do nearly 17 deals every month to earn $250K.  And that’s before expenses.

I can tell you that only the top 1% of mortgage originators in North America are achieving that kind of unit volume and they’re not doing it alone.  They have a team of at least one and more than likely two or three staff that they have to pay out of their pocket.

There’s just no way in today’s “over-paperized” mortgage climate to do that kind of volume on your own.

If you’re making less than 150 bps per deal, you have 2 options:

Sell a higher rate and ask your manager to increase your compensation plan across the board to 150 basis points in exchange.  If your comp is in the 80 – 100 bps range, what is the interest rate impact of another 50 – 70 bps?  Probably an eighth of a point.

So if you’re selling 3.5% now, then you need to start selling 3.625% once your comp increases to 150 bps.  It’s a wash for your company – they earn the exact same amount.

The biggest challenge with this option is your own mindset.  If you think the customer is going to balk and shop you, you’re right, but only because of your lack of confidence.

The truth is – and any experienced originator knows this – if you’re earning purchase-deal referrals, you’re likely NOT being shopped and you just need to get over it in your head.

Which leads us to your second option.  If your manager says it can’t be done – increasing your comp in exchange for you selling a higher rate – then you need to go over their head or move your license.

Seriously.  Many companies have flexible compensation plans that allow loan originators to change their compensation plan monthly or even weekly.

Obviously there are lots of other factors you should consider beyond compensation when making a decision to move your license, but that is a big one.  You are at a serious personal income disadvantage if you’re not earning at least 150 bps.

And finally, don’t let your compensation paralyze your lead generation.  This would be an easy excuse to say, “I’ll ramp up my prospecting once I settle my comp plan.”

Hit the phones, build relationships with referral sources, and get your comp to a level you deserve and reap the financial rewards from both.

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