Five difficult questions your sales manager probably can’t answer
Do you know how much you’re paid as a percentage of your company’s gross revenue?
According to the latest MBA data, the industry average is 27%. Which means that for every dollar your loans bring into the company, you take home roughly twenty-seven cents.
I have originators earning 55%, with better rates than their competitors.
If you’re wondering how that’s possible, you’re asking the right question. And it’s almost certainly a question your sales manager can’t answer.
And the reason they can’t is that they don’t have the information. Companies keep the real margin and cost information under lock and key because information is power. And whoever has the information has the power.
It’s shocking to me how sales managers and originators are expected to make good decisions with only limited information.
The Data Nobody Talks About
I bought the MBA’s annual performance report, so you don’t have to. Here’s what it reveals:
In 2024, the average loan generated $12,443 in gross revenue. The industry’s total expenses were $12,057 per loan. This left a profit of exactly $386 per loan.
This year?
Gross revenue is up to $13,006 per loan, an increase of $563.
The headlines will call this a recovery. “Profits have doubled!” they’ll say.
But here’s what they won’t say:
That increase came from higher margins, which means higher rates charged to borrowers. And despite those higher margins, originator compensation per loan went down $44.
Read that again.
Revenue per loan is up.
But your commission per loan is down.
So…
Where’s the money going?
The 68% Problem
The TLDR is that the industry doesn’t have a revenue problem. It has a cost and productivity problem. And it’s a problem they’ve decided to solve by making you the one who pays for it.
Since 2020, originator compensation per loan has increased 15%.
Over that same period, all other expenses (the cost of everything except your commission) have increased 68%.
In 2020, non-commission costs were $5,000 per loan. Today they’re $8,600 per loan. That’s an increase of $3,600 per loan that you, the originator, are subsidizing through higher rates and lower relative compensation.
So when your sales leader tells you the company needs “more revenue per loan,” you should translate that in your head to “We need you to sell higher rates because we can’t control our costs.”
Don’t believe me?
The Math That Matters
Let me make this concrete.
If the industry average for costs (excluding your commission) is $8,400 per loan, and a company wants to make $1,000 profit, they need to generate $13,400 in revenue to pay you, cover their costs, and make their margin.
But if a company has reduced their non-commission costs to $6,400 per loan—$2,000 less than the industry average—they only need $11,400 in revenue to achieve the same profit.
That $2,000 difference can go one of two ways: better rates for borrowers, or higher compensation for originators. Or some combination of both.
This is how originators end up earning 55% of gross revenue instead of 27%. Not through negotiation. Through operational efficiency.
Still don’t believe me?
A Small Test
I’ve prepared five questions. They’re not trick questions. They are simply the questions that any originator serious about understanding their own economics ought to be able to answer, or expect their employer to answer for them.
Copy these into an email and send them to your branch manager with a message like:
Hey Chad,
Just going over my end-of-the-year numbers and I have a few questions…
Or print them out and have them ready for your next phone call with them.
Then pay attention to what happens.
The Questions
Question 1: What is the total gross revenue generated by my loans over the past 12 months?
Question 2: What percentage of that gross revenue did I receive as commission?
Question 3: What is the company’s cost-per-loan, excluding originator compensation?
Question 4: How have non-commission costs per loan changed since 2020?
Question 5: What specific operational changes has the company made in the past 12 months to reduce cost per loan?
What To Look Out For
Question 1: What is the total gross revenue generated by my loans over the past 12 months?
(Not volume. Not units. The actual dollars my production brought into the company. If they can’t tell you this, they either don’t know or don’t want you to know.)
Question 2: What percentage of that gross revenue did I receive as commission?
(Industry average is 27%. Some companies are lower. A rare few are significantly higher. Where do you actually sit?)
Question 3: What is the company’s cost-per-loan, excluding originator compensation?
(Industry average is now $8,417. This is everything it costs to process, underwrite, close a loan, and run a company—before you get paid. This number tells you how efficiently (or inefficiently) your company operates.)
Question 4: How have non-commission costs per loan changed since 2020?
(The MBA data shows a 68% increase. Originator compensation increased 15%. If your company’s numbers are worse than that, you’re subsidizing someone else’s inefficiency.)
Question 5: What specific operational changes has the company made in the past 12 months to reduce cost per loan?
(Vague answers like “we’re always improving” don’t count. You want specifics: process automation, headcount optimization, technology investments with measurable ROI. If they can’t name concrete changes, there probably haven’t been any.)
What You’re Really Asking
As you can see, these questions are designed to probe something more fundamental than accounting. They are designed to ask: Is my company structured to help me compete, or am I structured to subsidize their overhead?
The reason why this is important is because in a commoditized business (and mortgages, for all their complexity, are essentially commoditized), competitive advantage comes from operational efficiency.
If your company spends $8,417 per loan on everything that isn’t your commission, you’re getting priced out of deals you should win or earning less than you could.
That FHA loan you lost last week? The one where you were 0.375% higher than the competition? That gap isn’t because you’re not good enough at your job. You’re not losing deals because you’re not good enough. You’re losing deals because you’re trapped in an expensive model.
Companies with lower costs can offer better rates to borrowers and better compensation to originators.
This is arithmetic, not alchemy.
Next Week
Send those questions. Pay attention to what comes back, or doesn’t.
In the next couple of newsletters, I’ll walk through each of these metrics in detail: what the benchmarks are, what “good” looks like, and what becomes possible when an organization, like Princeton, takes operational efficiency seriously instead of just talking about it (yup, I’m going to open my books for you).
Then compare whatever answers you receive to what I’ll share.
The gap between those two things will tell you everything you need to know about where you’re working.
The math isn’t complicated.
The next conversation you have with your sales manager, however, might be.
Rich
