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How Sales Commission Software Helps

Automate Mortgage Broker Compensation 01

HOW SALES COMMISSION SOFTWARE HELPS

AUTOMATE MORTGAGE BROKER COMPENSATION



02

03

06

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08

Introduction

Incentive Software Eliminates Spreadsheet Complexity

Enhance Collaboration

Maximize Engagement

Conclusion

Contents



In today’s fast-paced and highly competitive real estate landscape, mortgage brokerages face considerable challenges when it comes to compensation management.

Because brokerages deal with a variety of lenders on a range of different terms, it’s crucial to profitability to be able to efficiently manage the differences imposed by each lender so as to not incur extra costs. As profitability for a typical mortgage broker is primarily based on volume, the ability to quickly adapt to differences in commission terms based on several criteria may be vital to maximizing profitability on each loan. Brokerages that spend significant time adjusting for each set of different criteria to accurately calculate commissions are limiting both profitability and the scalability of their operation.

The housing crisis of 2008 may have significantly reduced real estate lending activity for a period of time, but the shake out of the mortgage lending business and low interest rates have led a resurgence. As such, mortgage brokers are seeing more activity in both the refinance and the new housing market. Business is again growing significantly both organically and through acquisitions, resulting in more brokers, staff, commissions and bonuses to deal with. An approach such as spreadsheet-based systems and one off manual equations to calculate compensation is not sustainable much less scalable. In addition, research shows that 90 percent of spreadsheets contain significant errors (Leung) and what business can support continual inaccuracies?

An automated sales compensation management system is thus vital for growing mortgage brokerages to accurately, efficiently and successfully scale their business.

Introduction




The typical mortgage brokerage employs up to 20 agents in a local office. The largest expense, by far, for brokerages is commissions. Commissions get paid when a loan officer matches a consumer with a lender, and a mortgage is originated. This is where processes can start to become very complex in order to calculate and pay commissions accurately and on time. On top of this, a brokerage may sell 10 to over 200 different lenders’ products and each lender may have different rate schedules, cost structures, fees, language and terms and commission reports.

There may also be deductions that must be taken into account such as where referral fees are paid, or perhaps the brokerage absorbs the appraisal fee to sweeten and close the loan. In addition to all of these components, some firms also have variable commission percentages based on factors like broker-seniority, referrals, preferred lenders, different loan programs, etc. These factors may result in unique plans for each loan officer and further, the plans may change a little or a lot from pay period to pay period.

Loan officer compensation generally has some or all of the following components:

Origination fee (typically a % of the total loan).

Additional percentage points negotiated by

the loan officer.

The premium spread (if strike rate is higher than the

product’s interest rate).

Any additional fees (ranging from credit report fees, to

doc fees etc.).



There may also be deductions that must be taken into account such as where referral fees are paid, or perhaps the brokerage absorbs the appraisal fee to sweeten and close the loan.

In addition to all of these components, some firms also have variable commission percentages based on factors like broker-seniority, referrals, preferred lenders, different loan programs, etc. These factors may result in unique plans for each loan officer and further, the plans may change a little or a lot from pay period to pay period.

Imagine being in charge of keeping track of this for about 20 people, who are incentivized to match as many loans as they can. Now imagine growing from 20 to 200 loan officer by acquiring new offices (all of which have different plans and processes). This becomes a data-nightmare and not at all scalable when calculated in spreadsheets. The pressure to deliver timely and accurate payouts increases the risk for manual error (and that risk increases with the complexity of the spreadsheet and processes). With strict regulation standards that must be adhered to, there is little room for error if brokerages want to avoid fines and lawsuits.




An automated compensation management system simplifies this process by providing integration of several data feeds, easy-to-use tools for non-programmers to build customized compensation plans for each loan officer, and automated commission calculations that remove error from the equation.

When administrators want to make changes using an automated system, it takes only seconds to jump-start the change approval process (and all changes are logged and auditable, unlike when using spreadsheets). This kind of flexibility is essential to any successful business that is growing.




Compensation administrators at mortgage brokerages are tasked with managing workflow between many segments of the business. There may be multiple departments associated with compensation management. It is the compensation manager’s job to make sure everyone receives important information and updates and also to make sure every necessary task has been completed.

The integrated internal workflow system that compensation management software provides, helps managers ensure efficient and effective business-wide communication.

Compensation management software makes communication and collaboration easy. Administrators can use a single platform to make sure everyone has been informed of important information. Integrated internal workflow allows managers to send notifications, send out approval emails to specific groups using custom approval hierarchies and integrate their information with auditing services to simplify compliance. Regulation has never been stricter, and

Enhance Collaboration



brokerages with manual compensation processes are exposed to severe consequences.

If you run a mortgage brokerage and do not give your loan officers visibility into their compensation plans, how can you expect them to effectively prioritize and set goals? When you hand them their paychecks with no explanation as to why they were paid a certain way, chances are they will have some questions. The amount of different terms and volume of lenders that brokerages are dealing with requires a high level of robustness is the way this data in managed and communicated. If your process is consistently producing errors, then you’ll likely be faced with a disengaged loan officer team, and in extreme cases of payment errors there can be legal consequences.

Compensation management software enables each employee to access every detail of his or her own payment structure. Loan officers can access reports explaining the payments they received, and they can even use forecasting tools to test what they’d earn based on hypothetical performance. This software allows them to understand precisely what they need to accomplish so they can set goals and remain motivated. Brokers can even use the software to set goals for loan officers, who can then track their performance as they work to reach those goals.

The success of a brokerage largely depends on the

motivation and work ethic of its loan officers.

Maximize Engagement



Conclusion

The housing market is quickly regaining strength. After already experiencing significant recent growth, The Mortgage Bankers Association predicted mortgage purchase originations will grow 10 percent in 2015, meaning there will be $905 billion in originations (MBA). With all of this growth in the real estate industry, mortgage brokerages need to be prepared to efficiently and effectively manage compensation. Brokerages must be able to adapt to rapidly changing conditions while simultaneously increasing accuracy, boosting loan officer motivation and maintaining compliance. Compensation management software is the best way for brokerages to succeed.



Are mortgage brokers a dying breed? (n.d.). Retrieved March 31, 2016, from

http://www.mpamag.com/news/are-mortgage-brokers-a-dying-breed-21787.aspx

Leung, S. (2014, September/October). Sorry, Your Spreadsheet Has Errors (Almost 90% Do).

Retrieved March 31, 2016, from http://www.forbes.com/sites/salesforce/2014/09/13/sorry-

spreadsheet-errors/

MBA Significantly Increases Lending Forecast, Originations to Top $800 Billion. (n.d.).

Retrieved March 31, 2016, from http://www.worldpropertyjournal.com/real-estate-news/

united-states/mortgage-bankers-association-revised-mortgage-lending-forecast-for-2015-

mba-july-economic-and-mortgage-finance-commentary-mike-fratantoni-lynn-fisher-joel-kan-l

lending-forecast-2015-9243.php

Total Rewards and Sales Compensation Effectiveness. (n.d.). Retrieved March 31, 2016, from

https://www.worldatwork.org/adimComment?id=74234

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