Over the last two weeks, we've met with mortgage bankers in Northern and Southern California, Colorado, Missouri, Montana and Utah. The photo below is from Kalispell, Montana, a great town where we took several time lapse photos of the same landscape every hour and every photo is completely different.
We’ve visited several mortgage companies recently that had several different ways to compensate Loan Officers and while the topic of Loan Officer compensation can be split out as several different blog entries, we’d like to narrow the topic to discuss paying Loan Officers a minimum wage.
Dodd/Frank Regulations were supposed to clarify how to compensate Loan Officers, but what we’re finding is the regulation has created a cornucopia of different compensation plans, varying from a Company’s business plan, and the geography of which they operate and compete for originators. The national consensus is a mortgage company pays a Loan Officer a minimum wage if the Loan Office is an inside employee and does not pay a minimum wage if the Loan Officer is an outside employee. So how does a Company define employee status?
Up until recently, the topic of paying a Loan Officer a minimum wage was centered around the consumer direct origination model where Loan Officers were funneled leads while they sat in an cubicle and fielded borrower phone calls and/or emails. Now we’re finding many mortgage banks paying Loan Officers a minimum wage whether or not they require the Loan Officer to be in the office. Many mortgage bankers have a percentage of ‘in office requirements‘ before a minimum wage is paid, while others have consolidated the requirement and pay a minimum wage if theLoan Officer has an internal designated desk.
To develop the ‘internal designated desk’ further, what if a company has an originator who is seldom in the office, but has a designated desk with photos of her husband and kids? Do they pay her a minimum wage? What about a new originator who is generating leads from the web or advertisements and is in the office all day, but since he is new and his volume is low, Management has decided not to give him a set desk until he starts producing. Which is considered an inside sales person?
If a Company pays the Loan Officer a minimum wage, how are hours track? Some mortgage bankers have their Loan Officers complete a daily time card, while others use modern technology and use a thumbprint to clock in. Of the companies who have their Loan Officers clock in, are they on the hook to pay overtime and when is overtime authorized? If a Loan Officer is required to come into the office and uses a modern technology like a thumb print, the answer is simple, clock in and clock out. However if the company has the Loan Officer complete a timecard, how are the hours worked managed?
With paying a minimum wage comes the added expense of overtime wages. Overtime expense can erode a mortgage company’s cost to operate. We’ve found successful companies have a written Loan Officer Compensation Plan detailing employee expectations, overtime requirements and a granular description of employment status. Recently several companies we've visited that don’t have a written and signed Loan Officer Compensation Plan have found themselves part of originator litigation lawsuits to recoup loss wages. While many of these lawsuits are often dismissed or settled out of court, they leave the Company exposed to added expenses in dealing with legal costs.
We’ve found many mortgage bankers pay a minimum wage either as a base or a draw against commission. Either way, we recommend our clients have a written and signed Loan Officer Agreement that addresses Company originator classification requirement pertaining to whether the Loan Officer is an inside or outside sales person and his/her compensation.
We’d love to hear what our readers think of paying a Loan Officer a minimum wage and what their requirements are. Dodd/Frank was meant to clarify the Loan Officer payment requirements, but we’re finding many mortgage bankers interpreting the regulations many different ways.
Cameron Watts, CMB
C. M. "Corky" Watts, CMB