Even in a bear market, lenders rely on LO signing bonuses

Gone are the days when loan originators received hefty signing bonuses to launch refi after refi. But make no mistake, even in a down mortgage market, lenders are still waiting for signing bonuses to recruit high-yielding LOs who can eat what they kill.

Signing bonuses are still here to stay for distributed retail LOs because the most productive LOs have always been in demand, said Jim Cameron, author of a report on signing bonuses from Stratmor Group. Distributed retail remains a relationship business, especially in a buy-dominated market.

“Good LOs have strong relationships with referral partners and a deep set of relationships with previous clients in the communities in which they live,” Cameron said.

“Independent mortgage bankers are more likely to move up and down aggressively as market conditions fluctuate,” Cameron added. “They have to – it’s a matter of survival.”

According to reportit was not uncommon for signing bonuses to be in the range of 75 to 100 basis points on volume in 2020 and early 2021 when retail margins were 150 to 200 basis points.

“Although the estimated reduction in signing bonuses is the subject of debate and can vary widely depending on the market and the specific facts and circumstances, it is not difficult to imagine that they are down significantly considering given the decline in volumes and margins,” Cameron said.

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Additionally, high-performing LOs often have a “free agent” mentality with an average turnover of around 30-40% and an average tenure of around three to four years.

Focused on building a personal brand, LOs are more likely to jump ship if another lender offers a better deal, another reason signing bonuses are here to stay.

Signing bonus amounts paid out this year are down 50% from what a sales manager saw in 2020 and 2021, but have yet to fall to 2018 levels.

In 2018 and early 2019, LOs that received signing bonuses in the range of 20 to 30 basis points would not have been out of the ordinary when profit margins were between 40 and 50 basis points base, Cameron said.

Lenders have better data and tools to understand the viability of potential loan officers, Cameron said.

While reviewing W-2 information and screenshots of LO production information was common, third-party data sources provide purchase loan amounts, refis, and production volume trends.

“While ubiquitous loan originator data can level the playing field, it also increases the already very high recruiting intensity for the most productive LOs in good and bad markets,” Cameron said.

With overall mortgage production in the United States expected to fall more than 40% this year to $2.4 trillion, independent mortgage banks are focusing more on purchase lending.

Recruitment battles for LOs remain fierce, but it could take a few months to land, especially with outbound recruiting, mortgage and LO officials previously told HousingWire. Although signing bonuses are not as generous as they were during the boom, many LOs who move receive better compensation in their new company.

“Our industry knows that the process of entering a market trying to find experienced originators is a very competitive and somewhat lengthy process,” said Paul Buege, CEO of Inlanta Mortgage.

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