Mortgage Officer Compensation and Pay Trends Survey January 2011 Survey Results
Table of Contents We conducted an online survey of Mortgage Officer compensation in Fall 2010. A total of 65 banks completed the survey reporting on a total of 329 mortgage officer incumbents. Data is effective as of November 2010. Total cash compensation is based on 2010 base salaries plus 2009 incentives or commissions earned. Survey Demographics 3 4 Compensation Structure 5 Mortgage Officer Compensation 6 8 Variable Pay Variable Pay Minimum Performance Requirements 9 Variable Pay Link to Asset Quality 10 Variable Pay Detail 11 13 Variable Pay Clawback Provisions 14 Variable Pay by Loan Type 15 Basis Points Paid by Loan Type 16 19 Loan Approval Authority 20 Mortgage Officer Benefits 21 Mortgage Officer Termination Pay 22 Mortgage Manager Compensation 23 24 Loan Workout Officer Compensation 25 Page 2
Survey Demographics Number of Banks by Asset Size (n = 65) Under $100 Million 1 $100 Million $249 Million 9 $250 Million $499 Million 17 $500 Million $999 Million 21 $1 Billion $2.99 Billion 13 $3 Billion $4.99 Billion 4 TARP Redeemed 3% TARP Status n = 65 0 5 10 15 20 25 Ownership Type n = 65 No TARP 29% TARP 68% Public 58% Private 42% Page 3
Survey Demographics Pay Classification of Lenders n = 65 Exempt, but considering reclassifying 28% Non exempt 17% Exempt and Non exempt 17% Exempt 38% Retention of Residential Loan Portfolio Respondents reported selling an average of 83% of their portfolio in the secondary market. Of 63 respondents, only 8 reported selling less than 50% of their loans. Page 4
Compensation Structure Compensation Structure for Mortgage Officers All Banks n = 65 60% By Asset Size n = 65 50% 43% 14% 43% 30% 10% Base salary only Base salary plus incentive/ commission Commission only 0% <$500M n = 27 $500M $1B n = 21 >$1B n = 17 Page 5
Mortgage Officer Compensation Compensation Banks Paying Base Salary Only (n = 9) Base Salary Entry Mid Level Senior All Orgs Average $ 33,387 $43,139 $57,235 25th Percentile $28,000 $35,400 $48,000 50th Percentile $28,000 $38,300 $52,040 75th Percentile $33,500 $46,176 $72,449 n (number of banks) 5 6 8 n (total incumbents in position) 10 11 23 Assets <$500M Average $29,833 $36,400 $48,533 25th Percentile $28,000 $34,750 $46,000 50th Percentile $28,000 $35,800 $50,000 75th Percentile $30,750 $37,450 $51,800 n (number of banks) 3 4 3 n (total incumbents in position) 5 6 10 Assets $500M $1B Average $38,718 $56,617 $62,455 25th Percentile $33,076 $52,426 $50,480 50th Percentile $38,718 $56,617 $72,000 75th Percentile $44,359 $60,809 $73,797 n (number of banks) 2 2 4 n (total incumbents in position) 5 5 13 * None of the banks with assets greater than $1B reported paying base salary only to Mortgage Officers. ** Some banks did not disclose the total number of incumbents in each position. If not disclosed, we assumed one incumbent. Page 6
Mortgage Officer Compensation Compensation Banks Paying Base Salary Plus Incentive / Commissions (n = 28) Base Salary Cash Comp Entry Mid Level Senior Entry Mid Level Senior All Orgs Average $30,319 $34,243 $43,087 $42,547 $58,198 $91,546 25th Percentile $24,002 $30,000 $35,975 $34,350 $46,329 $63,750 50th Percentile $30,000 $34,000 $41,000 $42,766 $54,750 $85,000 75th Percentile $36,003 $38,000 $55,000 $46,250 $69,875 $118,750 n (number of banks) 19 17 24 16 14 20 n (total incumbents in position) 36 41 73 28 34 67 Assets <$500M Average $31,917 $39,179 $48,086 $45,131 $49,058 $76,443 25th Percentile $30,000 $31,875 $36,000 $42,800 $40,763 $56,200 50th Percentile $30,000 $37,750 $55,000 $45,000 $50,500 $64,200 75th Percentile $35,625 $46,679 $57,400 $52,000 $53,375 $85,300 n (number of banks) 6 6 9 5 6 7 n (total incumbents in position) 9 11 16 8 11 13 Assets $500M $1B Average $29,008 $30,509 $41,700 $42,833 $69,375 $98,717 25th Percentile $23,832 $23,746 $29,830 $36,750 $60,875 $82,500 50th Percentile $30,000 $29,002 $40,000 $42,500 $67,250 $98,000 75th Percentile $34,000 $35,500 $55,925 $44,500 $75,750 $112,750 n (number of banks) 7 6 7 6 4 6 n (total incumbents in position) 7 11 19 6 9 18 Assets >$1B Average $30,251 $32,801 $38,676 $39,618 $60,731 $100,502 25th Percentile $25,000 $30,000 $35,979 $32,400 $43,829 $65,369 50th Percentile $30,750 $32,000 $39,000 $40,960 $55,386 $100,000 75th Percentile $35,375 $36,005 $42,750 $42,732 $72,289 $141,065 n (number of banks) 6 5 8 5 4 7 n (total incumbents in position) 20 19 38 14 14 36 * Some banks did not disclose the total number of incumbents in each position. If not disclosed, we assumed one incumbent. Page 7
Mortgage Officer Compensation Compensation Banks Paying Commission Only (n = 28) Page 8 Cash Comp Entry Mid Level Senior All Orgs Average $45,650 $82,583 $145,721 25th Percentile $32,500 $49,500 $82,500 50th Percentile $47,500 $68,095 $100,648 75th Percentile $57,500 $83,061 $150,448 n (number of banks) 10 12 14 n (total incumbents in position) 25 42 62 Assets <$500M Average $45,000 $54,333 $103,000 25th Percentile $37,500 $41,500 $60,000 50th Percentile $45,000 $48,000 $100,000 75th Percentile $52,500 $64,000 $160,000 n (number of banks) 2 3 5 n (total incumbents in position) 2 4 6 Assets $500M $1B Average $53,038 $66,449 $114,400 25th Percentile $45,000 $50,000 $90,000 50th Percentile $50,000 $70,000 $100,000 75th Percentile $60,000 $75,000 $107,000 n (number of banks) 5 5 5 n (total incumbents in position) 19 24 36 Assets >$1B Average $33,770 $123,939 $238,272 25th Percentile $25,655 $64,643 $95,971 50th Percentile $40,000 $92,879 $111,544 75th Percentile $45,000 $152,175 $253,845 n (number of banks) 3 4 4 n (total incumbents in position) 4 14 20 * Some banks did not disclose the total number of incumbents. If not disclosed, we assumed one incumbent.
Variable Pay Minimum Performance Requirements A majority, or 86% of respondents, reported paying commissions and/or incentives. Some banks require minimum performance requirements before incentives or commissions are earned. Banks requiring a minimum yield on loans before paying incentives n = 53 Banks requiring minimum volume requirements before paying incentives n = 56 Require 23% Do Not Require 77% Require 32% Do Not Require 68% For those reporting a minimum yield, the average loan yield ranged from 0.5% to 1.8%. Eleven banks reported a monthly loan minimum with a range from $50,000 $500M; median = $500,000/month. Other reported methods include: Commission calculation must exceed quarterly salary received, or must exceed base salary. Page 9
Variable Pay Link to Asset Quality Eleven percent of respondents* reported modifying or reducing incentive or commission payments based on asset quality measures and three percent plan to implement this type of feature in the near future. Five percent of banks* hold back a portion of incentives until the end of the year to assess asset quality and another five percent plan to implement this type of deferral feature in the near future. The chart below depicts common asset quality measures used by banks that reported using or planning to use these going forward. Asset Quality Measures n = 9 60% 56% 50% 44% 44% 30% 22% 10% 0% Non performing assets Past dues Classified loans Other 22% of banks used more than one asset quality modifier. The other category in the above table includes: financial distress, need to buy back secondary mortgage loans, loan closing /early payment exceptions, and other policy exceptions. * Based on 62 responses to this question. Page 10
Variable Pay Detail Additional Pay for Overages? n = 45 No 78% Yes 22% Reduce Payments for Underages? n = 47 No 73% Yes 27% Twenty two percent of respondents reported paying for overages or above PAR pricing. For those that pay for overages, the majority split the profit with the mortgage officer. The range is from 60%, with the most prevalent being 50%. Two banks mentioned paying 5 basis points for overages. Twenty seven percent reported reducing payouts for underages or sub PAR pricing. For those that reduce payments for underages, all of the banks mentioned reducing pay/commission by some amount. The majority of mortgage officers are responsible for either 50% or 100% of the underage. Note: The Mortgage Compensation Guidelines released by the Federal Reserve and the Dodd Frank Act prohibit paying incentives for overages. Page 11
Variable Pay Detail Incentive for Deposit Generation n = 56 Incentive Paid for Referrals n = 56. No 84% Yes 16% No 62% Yes 38% 16% of banks pay incentives for deposit generation. Of those, some pay as part of their bonus calculation, others paid between $10 $50 per new account. 38% of banks pay incentives for referrals. Of those, most paid between $25 $500 per referral, with most prevalent being $50. Most required the referral lead to a closed loan. Page 12
Variable Pay Detail Incentives Payout Schedule n = 60* Quarterly 8% Monthly 61% Annually 13% Biweekly 18% Incentive Plans Capped? n = 56 Yes 9% No 91% Themajorityofbankspaycommissions on a monthly basis. We anticipate more banks will lengthen the pay schedules or add a deferral or holdback feature to help mitigate risk. The majority of banks with a commission or incentive structure report having uncapped plans. This is fairly common for the mortgage officer position. * Three banks noted paying commissions monthly and incentives quarterly or annually. Page 13
Variable Pay Clawback Provisions Twenty five percent of respondents* currently have clawback provisions for their mortgage officers and another five percent are implementing clawbacks in the near future. Forty percent of banks with clawback provisions reported their recovery periods are under one year, while one third reported having indefinite recovery periods. Clawback Recovery Period n = 15 27% 33% Indefinite One to three years Less than a year * Based on 63 responses to this question. Page 14
Variable Pay by Loan Type How are Incentives/Commissions Paid on Different Loan Types? Residential 1 4 Family Residential Multi Family Jumbo Based on loan portfolio/profitabilty Basis points based on loan production/volume Percent of Fees Refinances Construction FHA/VA Second Mortgages 0% 10% 30% 50% 60% 70% Residential 1 4 Family n = 53 Residential Multi Family n = 38 Jumbo n = 51 Refinances n = 53 Construction n = 39 FHA/VA n = 48 Second Mortgages n = 27 Loan Profitability Methodology For those that paid a percentage of loan profit the range of profit shared is between 45% and 60%. Other methodology includes: of income (fees and yield spread), brokered loan profit multiplied by incentive percentage of 2.5% 10%. Loan Basis Points Methodology 52% of banks (n = 54) use a tiered approach where basis points vary by loan volume. See next page for additional information. Loan Percent of Fees Methodology For those that paid a percent of fees, the percentages ranged from 6% 75%. The median percent of fees paid is 50%. Various qualifiers: total income after taxes, fees earned in excess of lender's quarterly salary, percentage varied based on loan volume and/or experience, refinances received 10% less than new loans. Page 15
Basis Points Paid by Loan Type Residential 1 4 Family Loans Residential Multi Family Loans 45% 70% 60% 35% 30% 50% 25% 30% 15% 10% 5% 10% 0% <30 30 39 40 49 50 59 60 69 70 79 >100 0% <30 30 39 40 49 50 59 60 69 70 79 Retail/Retained Portfolio Retail/Secondary Market Wholesale Retail/Retained Portfolio Retail/Secondary Market Wholesale n = 21 n = 27 n = 7 n = 10 n = 13 n = 3 * None of the banks paid basis points between 80 99 bps * None of the banks paid basis points greater than 80 bps Page 16
Basis Points Paid by Loan Type Jumbo Loans Refinance Loans 45% 35% 35% 30% 30% 25% 25% 15% 15% 10% 10% 5% 5% 0% <30 30 39 40 49 50 59 60 69 70 79 >100 0% <30 30 39 40 49 50 59 60 69 70 79 >100 Retail/Retained Portfolio Retail/Secondary Market Wholesale Retail/Retained Portfolio Retail/Secondary Market Wholesale n = 20 n = 27 n = 5 n = 21 n = 28 n = 6 * None of the banks paid basis points between 80 99 bps * None of the banks paid basis points between 80 99 bps Page 17
Basis Points Paid by Loan Type Construction Loans FHA/VA Loans 35% 35% 30% 30% 25% 25% 15% 15% 10% 10% 5% 5% 0% <30 30 39 40 49 50 59 60 69 70 79 >100 0% <30 30 39 40 49 50 59 60 69 70 79 80 89 >100 Retail/Retained Portfolio Retail/Secondary Market Wholesale Retail/Retained Portfolio Retail/Secondary Market Wholesale n = 19 n = 20 n = 5 n = 14 n = 27 n = 6 * None of the banks paid basis points between 80 99 bps * None of the banks paid basis points between 90 99 bps Page 18
Basis Points Paid by Loan Type Second Mortgage Loans 50% 45% 35% 30% 25% 15% 10% 5% 0% <30 30 39 40 49 50 59 >100 Retail/Retained Portfolio Retail/Secondary Market Wholesale n = 10 n = 12 n = 4 * None of the banks paid basis points between 60 99 bps Page 19
Loan Approval Authority Loan Approval Authority? n = 54 Yes 15% No 85% Fifteen percent (15%) of banks reported their mortgage lenders have loan approval authority ranging from $75,000 $400,000. Some banks indicated having different limits based on secured loans vs. unsecured loans. Five banks indicated having an underwriting department or senior lender who has various levels of loan approval authority. Four banks indicated using a secondary market for underwriting decisions. Page 20
Mortgage Officer Benefits Benefits Offered to Mortgage Loan Officers n = 65 100% 80% 60% 0% Methodology Most banks offered several types of benefit to their mortgage lenders. The other category in the above table includes ten banks that indicated loan officers have cell phones and four banks that provide some sort of transportation benefit to their mortgage loan officers. Wellness benefits, tuition reimbursement, laptops, and business entertainment or expense accounts were also noted by individual banks. Equity Benefits None of the banks reported paying a portion of cash incentives or commissions in equity. Only five percent of banks provide equity to their mortgage officers as an additional incentive. Page 21
Mortgage Officer Termination Pay Incentive/Commission Payout Schedule at Termination* n = 55 16% Pay according to next payout schedule Pay out after 30 days Pay out after 60 days Pay out after 90 days 0% 4% Incentive is forfeited Other Most banks () reported they will pay according to their next payout schedule and twenty percent of banks have commission or incentive forfeited in case of employee s termination. * Does not include termination for cause or fraud. ** None of the banks reported pay out after 90 days. Page 22
Mortgage Manager Compensation Mortgage Manager Compensation (n = 52) Cash Base Salary Compensation All Orgs Average 92,295 111,986 25th Percentile 66,875 72,000 50th Percentile 80,500 100,000 75th Percentile 110,000 125,033 n (number of banks) 52 49 Assets: <$250M Average 65,629 76,233 25th Percentile 53,700 63,800 50th Percentile 60,000 74,000 75th Percentile 72,500 95,000 n (number of banks) 7 6 Assets: $250M $499M Average 74,288 92,883 25th Percentile 65,000 63,000 50th Percentile 72,000 74,500 75th Percentile 80,000 94,938 n (number of banks) 13 12 Assets: $500M $1B Average 103,705 124,893 25th Percentile 78,750 78,172 50th Percentile 85,297 105,000 75th Percentile 122,500 138,750 n (number of banks) 16 16 Assets: >$1B Average 107,182 128,868 25th Percentile 79,867 102,900 50th Percentile 101,755 116,567 75th Percentile 117,500 132,517 n (number of banks) 16 15 Page 23
Mortgage Manager Compensation Manager Incentives Criteria (n = 53) 45% 35% 30% 25% 15% 10% 5% 0% Overall department volume Individual portfolio Corporate goals Departmental profit Basis point override Other Methodology Many banks chose more than one category. Seven banks did not have incentives for mortgage managers; therefore, are not included in the table above. The Other category includes five banks that base incentive on overall bank and/or departmental goals; two banks that indicate it is a discretionary bonus and three banks that use quality measurements (i.e. compliance, risk management, service quality). Incentive Plans Of fifty three respondents, 60% reported not having a cap on manager incentive plans at all. A third (33%) of banks reported having a caponthemanagerincentiveplansasa whole, and six percent (6%) reported having a portion of the manager incentive plan capped. Page 24
Loan Workout Officer Compensation Loan Workout Officer Compensation (n = 20) Base Salary Cash Compensation All Orgs Average 73,168 73,318 25th Percentile 49,775 50,000 50th Percentile 70,815 70,815 75th Percentile 92,500 94,375 n (number of banks) 20 20 n (total incumbents in position) 42 42 Assets: <$500M Average 63,000 65,000 25th Percentile 45,000 45,000 50th Percentile 50,000 50,000 75th Percentile 65,000 65,000 n (number of banks) 5 5 n (total incumbents in position) 7 7 Assets: $500M $1B Average 77,020 79,220 25th Percentile 49,100 54,100 50th Percentile 90,000 90,000 75th Percentile 100,000 100,000 n (number of banks) 5 5 n (total incumbents in position) 5 5 Assets: >$1B Average 76,327 77,527 25th Percentile 58,303 58,303 50th Percentile 76,709 76,709 75th Percentile 84,125 90,625 n (number of banks) 10 10 n (total incumbents in position) 30 30 Page 25 Loan Workouts Only 12% of banks loan officers are responsible for loan workouts. In 6% of banks, loan officers are responsible for some of the loan workouts. Fifty two banks responded. 44% of banks have separate loan workout officers. The table to the left represents the compensation of these separate loan workout officers. Four banks reported having separate loan workout officers; however, did not report their salary. Therefore, these four are not included in the table to the left. 25% of banks with separate loan workout officers pay incentives for loans worked out. Incentives used for loan workout officers include: performance against individual and/or corporate goals, board discretion, incented per workout, and as a percent of re capture.