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I cannot recall but a single instance of real pressure from a loan officer of a real bank. I can recall a few mortgage brokers who would do so but I refused to work for them and turned back more than one rather than deal with it. So yes I can argue that for LOs who are paid a salary, and the bank eats its own cooking, the opposite impact is there. The banker is looking to CYA. The Loan originator is pawning the loan off on Fannie or FHA and therefore wants only to close the loan. I know 3 bankers who were fired for making bad loans. One was so bad he was banned from banking for life when the FDIC got involved (it literally almost took down the bank the loss was so bad.) When the loan department makes money (in house money) then bonuses are paid at the years end. If a loan is suspect and your appraisal doesn't support the loan, then guess what? They don't make the loan and hence don't lose money on it. So there is a financial interest in winnowing out the potentially problematic loans before they go sour. I've never heard of a mortgage broker fired for anything since they are generally independent operators.
No BANK pays LOAN OFFICERS by commission that I know of. MORTGAGE LENDERS, MORTGAGE BROKERS, or MORTGAGE ORIGINATORS are paid by commission. Big difference. I never worked for originators. I worked for bank loan officers. A fricking mortgage company is not a bank. A mortgage broker is not a banker.
From their top secret, highly guarded back to the future time machine
Mebbe. mebbe not. Every - repeat every - bank employee I know who interacts with the public has some part of her compensation that is performance (or goal, or commission, or etc.) driven. For the teller, it may be meeting the "goal" of "selling" another deposit account, or "selling" a credit card or "selling" a line of credit while an existing customer is at her window For a "banking officer", production goals for new deposit accounts, new loans, new LOC's, etc. are very much loaded in to total compensation. The same is true of branch managers (who may also be incentivized with some profit threshold that must be met). While these incentives may not be as direct as a loan officer's commission expressed as a percentage of origination (and often as percentage of any interest rate kicker of additional loan discounts), they are very real and are a basis for one keeping her job as well as receiving some sort of incentive comp.
Yes, banks that make money tend to share some profit with the loan officer, but profit is not in origination, rather is in a performing loan. Only those loans sold off would even produce an income for servicing or fees. But that is a loan originator when sold off. The LO has the incentive to make a well supported loan so that they do not get fired and making any and every "bad" loan is "bad" for the bottom line, so the incentive is to hire the best appraiser and know what the collateral is. The LO who manages to salvage the lent money in foreclosure is far better off than one who loses a few hundred thousand on a loan that was made with inadequate vetting of the property backing the loan. It's called skin in the game and if these CEOs had skin in the game many companies would be run better. Executive compensation is also much divorced from actual long term management and profitability of a company or bank.
