How to read a comp plan before you move shops

Every offer is priced on a number you have not closed yet. Your trailing twelve months is the honest starting point, but some of that book stays behind when you move: referral partners who need time, past clients who never hear that you moved, and a pipeline that funds at the old shop.

So price each offer three times: at 100 percent of your trailing twelve months, at 85 percent and at 70 percent. If a plan only looks good at 100 percent, it is a plan for a year you may not have.

Comp plans come in a handful of shapes, and each one keeps its real cost in a different place.

• Basis points on volume. A W-2 plan at 100 bps pays $1,000 for every $100,000 you fund. Easy to compare, as long as you also read the tiers and the fees.
• A split of revenue. Common on 1099 plans: you keep a share of what the company earns on each loan. Ask which revenue figure the split applies to. A 70 percent split of 225 bps is 157.5 bps to you, before your own expenses.
• Salary plus bps. Usual at banks and credit unions: a base salary and a smaller amount per loan. Compare the total at your volume, and ask whether the salary is a draw that later volume pays back.
• A flat fee per loan. A set amount for each funded file. Your average loan size decides whether it beats basis points.
• A P&L branch. You run your branch's profit and loss and keep what is left. The number that matters is what lands after every expense the branch carries.

Most plans pay more as your volume grows. How the step up is applied matters as much as the rates on the sheet.

Take one plan: 80 bps up to $25 million a year and 100 bps above it. Here it is read two ways for an LO whose trailing twelve months is $30 million, priced at three levels of the book following them.

Retroactive tiers pay the whole year at the tier you reach. Marginal tiers pay each slice of volume at its own rate. In the top two rows the gap is $50,000 a year, from the same two numbers on the same sheet. At 70 percent both readings agree, because the higher tier is never reached.

There is a third reading: tiers that reset every month or quarter on annualised volume. A slow quarter then costs you the higher tier for that quarter, even when the year ends above it. Ask which of the three the plan uses, and ask to see it in writing.

Two plans with the same basis points can pay very different money once the deductions are in.

• Fees per file. Processing, compliance or technology fees charged to you on each loan. Multiply them by your units, since they do not shrink with a smaller loan.
• Who pays the processor. A processor the company pays for is worth real money compared with one you pay per file. Ask how many LOs that processor supports.
• Marketing and leads. A marketing budget, company leads or leads at cost each change what you spend to keep your volume.
• Your own costs on a 1099 plan. Self-employment tax, your own benefits and your errors and omissions cover, which a W-2 plan usually carries for you.
• Draws and clawbacks. A draw is paid back from later comp. A clawback takes comp back when a loan pays off early. Read both clauses before you sign.

Then subtract the cost of the move itself: licensing fees in new states, the weeks your pipeline funds elsewhere and anything you owe your current shop.

Under the federal loan originator compensation rule in Regulation Z, a company may not pay you more or less because of a loan's interest rate, its other terms or a stand-in for them. Paying more on higher volume is allowed. A plan that pays a different rate on certain products or programs is a reason to ask questions before you go further.

• Which tier would I land in at 70, 85 and 100 percent of my last twelve months?
• Are the tiers retroactive, marginal or reset each period?
• Which fees are charged to me per loan, and what did they add up to last year?
• Who pays my processor, and how many LOs does that processor support?
• Is any part of my pay a draw, and what triggers a clawback?
• What did the LOs who joined last year close in their first twelve months?