While total loan volume increased slightly year over year during the second quarter, loan originators (LOs) saw decreased commissions during the period, according to the latest report from LBA Ware.
Quarterly commissions earned per loan originator dropped 6% during Q2, partially due to a 4% decline in loan volume per LO. An increase in lender hiring of originators offset the growth in mortgage volume, leading to a 1.76% annual decrease in per-loan commissions, from 103.119 basis points in the second quarter of 2020 to 101.308 basis points in the same period this year.
Also contributing to the backtrack in commissions has been the slowdown of refinance lending during the spring. LOs funded an average of $900,000 in refinance volume per month in the second quarter, a staggering fall of over 36% from Q2 2020. Average commissions per refi also saw a substantial decrease, with LOs getting 91.679 basis points per refi, down 6.94% from the second quarter one year prior.
Despite the reduced commissions, a robust purchase market helped loan originations keep up a stout year financially, said LBA Ware founder and CEO Lori Brewer. While per-loan commissions on purchase lending was also down (107.649 on average during Q2, down from 108.836 in Q2 2020), total purchase volume was up 49% and LOs averaged $1.52 million in funded purchase loans per month, up 41% year over year.
Overall, LOs in LBA Ware’s dataset took home an average of $2,876 in commissions per loan — about 35% of the $8,243 it cost to originate a retail loan, per 2020 data from the Mortgage Bankers Association.
“LOs continue to benefit from a strong purchase market buoyed by low rates, flex work opportunities and millennials moving out of their parents’ homes,” Brewer said. “If the macroeconomic environment stays strong for the second half of 2021, LOs could have another banner year.
“Another notable observation,” Brewer continued, “is that lenders added processing manpower at almost ten times the rate they added LOs in Q2.”
Loan processor staffing increased a whopping 49% annually in the second quarter, resulting in processors handling 27% fewer loans per month. Subsequently, loan processors saw a 26% decrease in quarterly bonus compensation, from $2,684 per processor during Q2 last year to $1,999 this year.
With processors handling such a decreased workload this year, Brewer expressed skepticism that lenders could keep up such personnel numbers as this lending cycle continues.
“It remains to be seen if that level of operational staffing will be sustainable over the long term,” Brewer said.