NMP - February 2018 - 83

How Lenders Can Create
an Efficient Commissions Calculations
and Payments Process That Keeps
Loan Officers Happy
BY BRIAN D. LYNCH

any lenders
lack an
efficient way
to calculate
and deliver
commissions
to their Loan Officers and this
issue has the potential to disrupt
lender profitability.
Loan Officers' success or
failure can make or break a
lender's branch. These people
are the stars of the mortgage
industry and they know it. Good
Loan Officers can go to another
lender if they are dissatisfied. To
the Loan Officer, lenders and the
jobs they offer are commodities
and the compensation process is
one of the few ways lenders
differentiate themselves.
Knowing the specifics of what
matters most to Loan Officers in
regards to compensation is the
first step in providing them with
the motivation to be productive,
happy and successful at a
particular branch.
The most common complaints
from Loan Officers deal with the
speed and accuracy of
commissions payments. The
most common cause of these
issues is that the tools being
used to calculate those
commissions were not designed
to do this. In fact, these tools
often only perform a portion of
the task leaving much of the
work to be done manually. The
people doing that work are often
under stressful deadlines, which
only add to the problem.
All too often, we see
spreadsheets being used to
perform these calculations. One
major issue here is that many
Loan Officers have customized
compensation agreements with
their employers. Using a
spreadsheet to calculate these
commissions often involves
manual entry that makes the task
tedious and time consuming.
Even worse, any increase in the
number of loans funded or Loan
Officers only serves to

M

complicate the process thereby
jeopardizing the very accuracy
and speed needed. Spreadsheets
are a fantastic tool, but they do
not provide the systematic
approach needed within a large
or growing organization to keep
Loan Officers happy.
If the calculation of
commission on each loan by a
Loan Officer were not enough, it
is only one part of the
commission calculation process.
Payroll draws, split commissions
and overrides add to the
complexity and further invalid the
efficacy of using spreadsheets.
To many lenders the task of
calculating commissions is so
time consuming that they only do
it once a month. This can put the
lenders relationship with the Loan
Officer in jeopardy especially
when other lenders with the
proper systems can offer more
frequent pay periods.
Most Loan Officers expect to
be paid the correct payment in
approximately a week or less, but
most lenders often take several
weeks to do so. This erodes the
relationship between lenders and
Loan Officers, especially if
payments need to be reissued to
fix mistakes. Loan Officers do not
consider these errors to be an
acceptable cost of doing
business. Instead they see them
as warning signs a lender is
actively choosing to tolerate
mistakes and long delays despite
the fact there are other options.
The speed of the calculation is
not enough. It has to be correct
as well. Incorrect commission
checks burn a lender's
reputation, encourages Loan
Officers to doubt their employer
and forces them to devote even
more time to double-checking
their commissions. These internal
headaches waste Loan Officers'
time and distract them from the
core business of serving
customers and closing more
loans.
Lenders can fix these problems

by focusing on cost-effectively
enhancing the speed, accuracy
and reporting of commission
amounts earned. This can be
done by automating the
calculation and distribution of
commission data to Loan
Officers.
Automating the commission
process makes it possible for a
lender to calculate commissions
in minutes rather than weeks.
Providing accurate and timely
commission data to loan officers
helps build the bond between the
lender and the Loan Officer.
Moving from a spreadsheetdriven system to an automated
approach is often met with some
concern about the effort needed
to implement such a system. This
is mainly due to the fact the
people being asked to implement
the new system are already
working overtime with the
existing system. Usually, the
system that best addresses a
lender's compensation plans will
be the easiest to implement and
because it addresses a particular
lender's compensation plans, the
calculations will be more
thoroughly tested and as a result
should be quicker and more
accurate than other systems that
might be available.
After implementing the proper
system, things like calculating
payroll draws and split
commissions, normally errorprone, manual processes should
no longer be an issue. The same
goes for lenders dealing with
suddenly higher loan volumes
that put pressure on accounting
departments. With the automated
approach, the level of
performance is maintained and
the lender is not forced to add

new staff.
One of the more practical
ways automation can reduce the
workload on lenders' staffs is
that they often have specialized
reporting tools that spell out how
commissions were calculated so
Loan Officers and even auditors
can easily understand at a
glance. Often in these cases if a
loan officer has an issue with a
calculation, he or she can easily
figure what the issue is on their
own. In many cases the issues
turn out to be a miscalculation
on the loan officer's part that
does not in any way damage the
lender's reputation for making
inaccurate payments.
As an added benefit, having a
systematic approach to
calculating commissions can
have a dramatic effect on the
time needed to audit those
calculations and the lender's
compliance with Dodd-Frank.
The savings in audit fees can be
significant. Under the old
spreadsheet approach, audit
satisfaction was only gained
after analyzing large numbers of
spreadsheets.
Loan Officers judge their
employers by how fast and
accurately commissions are paid
to them. When there are issues
with the accuracy, speed of
payments and the clarity of the
calculation, loan officers can
judge very harshly and seek out
other opportunities. The
commission calculation and
payment process can be
dramatically and cost-effectively
transformed through automated
solutions that not only speed up
the calculation but also provide a
much higher degree of accuracy
and happier Loan Officers!

Brian D. Lynch is President and Founder of Irvine, Calif.based Advantage Systems, a provider of accounting and
financial management tools for the mortgage industry,
responsible for managing the company's day-to-day
operations, and guiding the company's strategic direction.
For more information, visit MortgageAccounting.com.


http://www.MortgageAccounting.com

Table of Contents for the Digital Edition of NMP - February 2018

Contents
NMP - February 2018 - Cover1
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NMP - February 2018 - 1
NMP - February 2018 - Contents
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