Banks and mortgage lenders hire mortgage loan officers to originate mortgage loans. Some loan officers work only in the bank’s branch to service the mortgage needs of the bank’s customers. Other loan officers are outside sales people who work with home builders, real estate agents and the public. Each mortgage lender pays its loan officers differently. Some are paid a salary while others only earn commission on the loans that close and fund.
Loan officers who receive commissions have them based on two main areas. The first area is the origination fee. Usually, this is expressed as a percentage of the loan amount. The larger the loan amount, the higher the origination fee. One point equals 1 percent of the loan amount. The borrower either pays points directly out-of-pocket, or the loan is increased to pay it for the borrower, along with the rest of the closing costs. Points are the lender's fee to you for arranging the loan.
Yield Spread Premium
Mortgage lenders receive points from the investor in addition to the points charged to the borrower. Most lenders structure their loans to receive funds from both the borrower and the investor on every transaction. The funds received from the lender are called the Yield Spread Premium (YSP). This is paid as a percentage of the loan based upon the interest rate on the loan. The higher the interest rate, the higher the YSP’s percentage. If the mortgage lender is acting as a broker, these funds must be disclosed on the good faith estimate and the HUD-1 settlement statement. If the lender is lending its own funds with the intent to keep or sell the loan later, it does not have to disclose this fee to the borrower.
The loan officer’s commission percentages vary from company to company. There isn’t a set or normal amount of commission. Much of the percentage is determined by how much support the company offers the loan officer. Some loan officers do not need much from their company other than business cards and a place to close loans. These loan officers can receive as much as 80, 90 or even 100 percent of the commission from their company. Other loan officers who work for companies that provide leads, computers and other support may only offer 20 to 50 percent commission or less.
While many companies offer salaries to their loan officers and advertise that they have salaried mortgage consultants, they often pay bonuses based on loan production and sales. Each company is allowed to structure its pay plan any way it wants. Often these bonuses are structured to encourage greater production and reward higher producing loan officers.