How does your organization compensate loan originators?
How has your organization changed its compensation package for residential mortgage loan originators in light of the ban on basing compensation on loan terms? Will your organization make further changes in response to the new changes to these regulations (taking effect in January 2014)?
Balancing the interests in attracting/retaining high-performing LOs and motivating them with sufficient incentives against the risks of noncompliance with heavy-handed and ever-changing regulations is causing our clients many sleepless nights!
To better serve our clients and provide certainty in uncertain times, we're asking for feedback on what your institution is planning to do and what your concerns are.
Here are some concerns that we've been made aware of so far:
Should my institution switch to salary-only compensation?
Will a salary-only compensation package be sufficient to attract and retain high-performing LOs?
Will a salary-only compensation package be sufficient motivation for LOs to meet their earning potential?
If your institution does not offer a salary-only compensation package, what is the best way to structure the incentives in compliance with the regulations and in the interests of simplicity and efficiency?
Is a compensation package based strictly on total loan amount (permissible under 12 CFR 1026.36(d)(1)(ii)) an intelligent choice for your institution?
Do I need to review business expenses for compliance with the LO compensation regulations?
How can I take advantage of the changes to the LO compensation regulations that will be effective January 2014?
Please allow us to share our insight into designing (redesigning) your LO compensation package. We're finding that a simpler compensation package is advantageous both in light of the new regulations and common business sense. Not only is it more difficult to review a complex compensation plan for compliance, but a bonus can't motivate an LO if the LO can't even understand what he has to do to earn it!
We recommend basing compensation at least in part on total loan amount.
From there, we would analyze the exceptions to the general prohibition on term-based compensation, and strive to take full advantage of them. At this point, we recommend involving your LOs in the process ... not only will seeking their advice help them to "buy in" to the process, but it will also ensure the compensation package is understandable and, in their eyes, fair.
"Trust is a requirement for strong friendships, families, and firms," writes David Horsager in his book, The Trust Edge: How Top Leaders Gain Faster Results, Deeper Relationships, and a Stronger Bottom Line. How do you build trust? Make small promises and keep them... if you tell someone you're going to get back to them this afternoon, do it. Under- promise and over-perform... do this consistently and people will trust that you're going to deliver great results.
Please tune in for future press releases where we can address more of the issues raised above, and other issues confronting our industry today. Please consider sending in a comment/question via phone, email, or LinkedIn--it will help us better serve you and we will do our best to respond.
Thank you so much! SCA is here to serve you... we're working hard to be your most trusted partner.
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**These are our opinions. We're not authorized, or willing, to express those of others.**