Posted by Kait Spurrier ● April 6, 2021

True or False: Loan Officers get paid more on loans with longer terms (30-year vs. 15 year)?

04.06.2021_Blog Image

Over the years, I have had multiple potential borrowers express concern that their previous loan officer possibly withheld potential mortgage options. The potential borrowers thought the loan officer did this for their own financial gain. The most common example of this is a 30-year loan vs. a 15-year loan, and not being given the 15-year option.

True or False:

A 30-year loan with a higher interest rate would yield a higher profit than a 15-year loan with a lower interest rate. As a result, the loan officer would get paid more on the 30-year loan because there is more profit in that loan.

FALSE! (plus it’s illegal)

It’s against federal lending regulations for a company to pay any of their loan officers on profit. Most loan officers are paid on basis points or a percentage of the loan amount. The company cannot differentiate between mortgage terms, discount points, origination points, products, or profitability when it comes to a loan officer’s paycheck.

For example:

  • A borrower receives an FHA loan for $200k with $5,000 down payment assistance as a 2nd mortgage that will eventually need to be repaid to the Maryland Mortgage Program
  • A Borrower receives a conventional loan for $200k with 1.5% in discount points to lower their interest rate by ½ of a percent
  • A borrower receives a VA loan with 100% financing (no down payment) for $200k

**The loan officer would be paid exactly the same on all 3 of these transactions***

Paying a loan officer consistently between different loan programs is extremely important. In the past, paying loan officers on profitability often led to the loan officer suggesting loan programs that weren’t always in the borrower’s best interest. This added to the 2008 mortgage crisis, and legislation was passed after the crisis to change how loan officers can be paid.

 

Kait_Spurrier_TouchedUp_Circle_ForApexTeamPage Kait Spurrier
Sr. Mortgage Banker
NMLS# 1277963
O: (410) 794-4127
kspurrier@apexhomeloans.com
apexhomeloans.com/kait-spurrier


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Topics: Mortgages for Millennials

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