MCAP is the latest lender to revamp its broker compensation policy.
Last week it announced a brand new set of bonuses for brokers, based partly on:
- 1st-year arrears (i.e. how many of the broker’s deals were 90-days in arrears in the first year.)
- Funding ratios (i.e. the % of a broker’s approved deals that close).
Both are fantastic ideas. After all, rewarding good funding ratios and low arrears encourages efficiency and deal quality. (It’s good that MCAP didn’t further penalize low funding ratios. Positive reinforcement is better than negative, and sometimes cancellations are unavoidable when it’s in the client’s best interests.)
Another change MCAP announced is that it will pay volume bonus (VB) not on firm-wide production, but on the production of the individual agent. This isn’t a new concept (some other lenders do it too), but it’s not the most common model either.
Paying VB on individual performance seems to make sense—at least at first glance. From a lender’s perspective, why pay a broker full volume bonus if they only do a few deals a year?
On the other hand, one could argue that lenders who link VB to individual production disincentivize new or smaller brokers. Reason being: Several competing lenders still pay full VB to new/small brokers based on the overall volume at that broker’s firm.
Whatever the case, it’s getting tougher and tougher for small brokers to deal with multiple lenders, and still get paid well. To the extent this affects broker impartiality, it’s a legitimate concern.
An exception to that statement applies to brokers who work under “super-agents.” Super-agents submit applications and aggregate volume from multiple sub-agents. The super-agents thereby earn maximum compensation from lenders and then share that wealth with their sub-agents.
Super-agents are a growing trend in the business, and they may someday become the only way for most new/small brokers to earn top dollar.
The question then becomes, what have lenders gained by encouraging the creation of these super-agents? That’s another debate for some other time…