Each week, I receive countless emails from loan officers dissatisfied with their small commission checks, looking for something better within the industry. They’ve learned the mortgage business inside and out, and have made the necessary sacrifices to put their career on firm standing. Not satisfied with the measly yield spreads and basis points their current company is paying, they look at other options and a way out.
You may recall in a previous article, I mentioned that:
“When I first started in the industry, my commission spread was 20% of the yield spread premium or YSP. And, if that wasn’t bad enough, we worked on teams of three people—two loan officers and a processor. This meant that any commissions I and my team earned, had to be split three-ways amongst us all. I’m not kidding! My commission after all was said and done was a measly 6.5-7.0% of the YSP. So, on a $3,000 loan, I would make about $200 at most. You don’t want to see what it looked like after they took taxes-out. Absolutely pitiful. Being ignorant (of the mortgage industry), didn’t make me stupid.” –END QUOTE.
If you are currently working as a loan officer, and want to know your career options, here are a few to consider:
Option 1: Become a full-fledged mortgage broker and open up your own mortgage company.
This is really the only way you’ll get 100% commission and be able to dictate life on your own terms. However, there are a few hurdles you must overcome, as well as drawbacks. One of the biggest hurdles is that many states require a certain level of capital to be held in reserves before you can even get licensed.
Many states have personal net worth requirements too and won’t even allow you to do anything under your own license until you can meet the standards they have set. Of course, there are experience requirements as well as a mandatory background check that is part of the process as well.
You’ll also have to not only sell the loans, but process them, market your company, and handle all the back-office paperwork and legal requirements. Not to mention, your choice of lenders you use will be extremely limited as the lenders themselves have their own set of criteria BEFORE they will even approve you for business. Mortgage brokering solely on your own under your own license sounds great at first glance, but only if you have the personal and financial fortitude to weather the inevitable hiccups.
Option 2: Become your own mortgage banker and finance your own deals.
This doesn’t really apply to you unless you are first a mortgage broker trading under your own license. Many brokers become large enough to where they make the transition from broker to lender. The reasons for doing so are obvious. Warehouse lines of credit, if secured from the right source, can provide a banker with an even larger yield spread than if they simply stuck to being a broker and going off other lender rates sheets. In this case, as a banker, you make your own “rate sheets” and set your own commission spread levels. Some mortgage bankers even go into wholesale lending and have other brokers feed loans into them.
Financing for mortgage banking can come from a variety of sources, such as warehouse lines, outside investors, etc. And the state and federal regulatory rules and regulations vary. One of the main advantages of mortgage banking is that you can set your own lending criteria and can approve loans that others deem too risky.
One of the best known examples of a mortgage broker transitioning into a mortgage lender, is Ditech Funding. (I am sure you’ve seen their commercials with the loan officer character!). I was told that their wholesale line comes from GMAC, and that Ditech was their largest client. This could be you some day!
Mortgage banking is certainly something to consider if you are already your own mortgage broker with your own license.
Option 3: Leave your company and join a net branch as your own branch manager.
Becoming a net branch is probably the best of both worlds. You are on your own under your own mortgage branch, but maintain much of the control over the day-to-day operations of the firm. The home office handles all the backend stuff such as accounting, legal and regulatory requirements. They also have established relationships with national lenders, many numbering in the hundreds. They can set you up quickly and provide a structure and support system to help you succeed.
The commission spreads from net branches vary widely and most firms require a minimum past experience of at least two to five years, showing a track record of success. Some firms have a set yield spread split, such as 70% to you and 30% to them. Others give you 90% or even a full 100%, but charge a fixed fee per file, as in between $300 to as high as $600 a loan. Although 100% sounds great, I’ve heard stories of even higher fees fixed file fees out there!
If the net branch doesn’t have a fixed split per loan, they may mark-up their rate sheets they give you and take the extra spread. For example a lender sends the net branch a daily rate sheet, the net branch home office marks it up a tad, and sends it off to you. And you never see what the “real” rates are!!! You are pricing off an already marked-up rate sheet and are never even aware of it! Sneaky, eh?! Not all firms do this, but some do!
Also, with net branches, although you are on your own, you still have to follow their set policies and file procedures. And the firm will have other unknown requirements and miscellaneous corporate rules. However you won’t find these out until you are well underway and committed to them.
It’s funny, many mortgage companies are really net branches in disguise. Maybe even the company you are working for now! That’s right! They probably were once a small little one-person net branch at some point too! But they grew-up, expanded and hired people to work for them. You can do this to! It’s a definite possibility.
Overall, net branches are a great way to “own your own business” without all the headaches and hassles that go along with it. However, a word of caution: research each firm thoroughly before you join and don’t make any rush decisions.
Some of the biggest net branches out there are: Allied Capital Corporation, Carteret Mortgage, Allfund Mortgage, Global Home Loans, Summit Mortgage, etc. (There are literally hundreds of choices, these are just a few!)
Option 4: Stay as a loan officer.
If becoming a broker, banker, or net branch manager doesn’t appeal to you, you can always stay as a loan officer and change firms. If you don’t want the responsibilities of running your own shop, why not simply move onto greener pastures.
There are many mortgage companies–even within your own city–that probably pay a lot more than you’re getting at present. Why not have a little look around and see what the other guys are paying? It doesn’t hurt to ask. Remember, being a loan officer is really being a salesperson. And working on commission, means that most firms will hire you with little hesitation (provided you have the educational and professional background). It’s little risk to them if you don’t succeed, because if you don’t sell, you don’t get paid.
Don’t be afraid to look elsewhere, because if you stay where you are, you’ll never get ahead.
Option 5: Move into another area of the mortgage industry.
As you know, I work in training and help loan officers and mortgage brokers succeed in the industry. I’ve been there, and done that already. After selling and closing thousands of loans, I know what works and what doesn’t. When I got burnt out from originating full-time, I decided to use my knowledge and experience to help train others.
This way, I am still a part of the mortgage industry I love, and have all the freedom and control over my life I want. You can do the same. This industry is in dire need of professional trainers. Like many people I’ve spoken to, I’m sure your training wasn’t much more than a cold telephone and a couple of bum leads. Mortgage training is a great area to consider.
And if not mortgage training, why not become an appraiser, title company owner, real estate attorney, loan processor, notary public, underwriter, wholesale account representative, etc. These are all great careers and still in the mortgage field.
Ultimately, where you go in the mortgage business is entirely up to you. The sky is the limit and your opportunities are endless. I’ve only just opened your eyes to a few of them.
By: Robert LawrenceAbout the Author:
Rob Lawrence is ranked one of top national trainers in the mortgage industry. He is the currently the CEO of Battlecall.com, coaching, tools and resources to turn mortgage professionals into mortgage warriors. Visit http://www.battlecall.com for his free “Sink Or Swim” weekly newsletter, mortgage training, marketing advice and more! Jumpstart your career in the mortgage business, starting today.
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