We know a loan officer with a large team who does about half of JVM’s volume – and he was offered a $6 million “signing bonus” to move to another mortgage bank.
He turned it down, however, and remained where he was (I will explain why below).
With higher rates and refis all but dead, lenders are now way over-staffed and desperate for volume any way they can get it.
Most of them have only one strategy to boost volume: recruit more loan officers.
BUT, it is extremely difficult to uproot loan officers – so, many mortgage banks resort to offering huge signing bonuses to lure producers into their webs.
Many successful loan officers though run kicking and screaming as soon as they hear that terrifying “signing bonus” phrase.
And, this is why: margins and profits in the mortgage industry are paper-thin (or non-existent often) and lenders that pay signing bonuses have no choice but to raise their rates to recoup those bonuses.
And – in today’s ultra-competitive market with higher rates, easy online rate shopping, and huge mortgages, rates matter more than ever.
So, loan officers know that accepting a signing bonus now will mean a lot less business in the future – particularly in environments like this where rates are rising.
Interestingly, some loan officers accept the signing bonuses anyway and often end up leaving the lender (which is why it amazes me that lenders offer these big bonuses).
Other lenders compete for loan officers by offering “3% commissions for every loan” a loan officer funds (got an email that said that last week in fact). BUT – that lender too will just have to raise rates about 1/2% higher to cover that extra commission because most loan officers keep the “compensation” set at around 1%.
So yes, Heejin and I could easily find a mortgage bank to partner with that would pay us a huge signing bonus or more compensation in a variety of other ways, but it would be extremely shortsighted and probably the end of JVM as we know it. And that is something we would never give up.
There are two big takeaways here for real estate agent readers:
- Paper-Thin Margins: Margins are much thinner in our industry than most people realize – so anything that adds to costs (signing bonuses, higher commission, closing cost credits, joint venture/profit sharing, and co-marketing) simply results in higher rates (every time); and
- Be Leery: Agents might be leery of loan officers who accept signing bonuses – because referring buyers to them means referring buyers to higher rates (every time).
Founder/Broker | JVM Lending
(855) 855-4491 | DRE# 1197176, NMLS# 310167