Why you should make a move sooner rather than later…
No, it’s not all about the money, Jerry. But, if you’re looking to capitalize on your last big transition package, you’d better act fast.
2020 and 2021 brought on some of the highest lending levels in the history of the industry. In turn, LO’s production and compensation seemingly doubled because of it; 20M producers were closing 40M, 40M producers were closing 80M, and so on. That caused companies to have high retention but also low recruiting levels. When you combine the perfect storm of record LO personal production/income, with a lender’s desperation to hire, you get what we have today; overpriced transition packages.
Prior to 2020, a LO with 30M production and 240K in income, would be looking at a solid offer which would keep them whole through a transition. Most lenders simply took a Loan Officer’s average monthly income (in this case 20K) and gave that to them for the first 3-4 months (on top of commissions).
In 2020, that same LO’s offer quickly doubled, and a 60-80K offer turned into 120-160K overnight.
In 2021, offers continued to grow and transition packages for a 30M producer rose as high as 200K to 250K. All the while, lenders knew a 30M LO, in 2020/21, was really a 15-20M annual producer in a normal market. Unfortunately, for the reasons stated above, these high offers became the new normal.
That brings us to 2022. With rising rates, and limited purchase inventory, most LOs are down 30-40%, and volume will continue to fall. Regardless, LOs are still basing their worth on 2021 numbers, and expect to get compensated for it. For that reason I’ve been telling LOs that the longer they stay with their current employer, the faster a potential offer decreases. Lenders are now placing more weight on YTD closed fundings and current pipeline, with less weight on 2021 earnings/volume. Therein lies the tug of war of what to offer in today’s environment.
Today, I’m seeing most banks/lenders settle somewhere between the 2020 and 2021, when putting together a transition package. Using that logic, today’s offer for a 30M producer should fall somewhere in the 120K-200K range, spread out over the first 3-4 months. Obviously, this is the average. Some lenders are still paying top dollar, while other banks, credit unions, and smaller lenders place more value on their entire value proposition.
Taking all of this into account, if you’re considering making a move in the next 6 months, know that an offer today will not be the same as an offer in the fall. By Q3, sign on money will resemble numbers prior to 2020, resulting in significant money left on the table.
Again, it’s not all about the money; but it doesn’t hurt to take advantage of a very active recruiting market. Feel free to share your thoughts.
Jeff Hutchinson
860 383 8100