The average mortgage broker salary varies greatly along a number of different parameters. The health of the real estate market that the broker is in is one of these factors. Another is the socio-economic status of their client, and still another, whether they are working in the residential or commercial markets.
A mortgage broker’s income will also vary by the number of sale they participate in as well as the size of each of those sales. With all of the variables, it should come as no surprise that the average mortgage broker’s income is reported differently by every source you check.
Perhaps the most credible source of information is the career service web site of “The College of William and Mary.” This site lists the average mortgage broker’s income as between $60,000 and $90,000 per year.
“Simplyhired.com” lists the average annual earnings of a mortgage broker at a slightly higher $115,000. “Answer.com” gives a monthly figure of $6,000 to $10,000 gross, which translates to $72,000 to $120,000 per year. Keep in mind that this is a gross figure. Most mortgage brokers are independent, working for themselves and therefore have to pay all of their own expenses.
Yet another source, “Payscale.com,” lists the median mortgage broker income at $62,148, with a range from $30,000 to $230,000 per year.
One final estimate comes from Indeed.com. They list the New York City mortgage broker salary at $138,000 per year. Of course, this is for New York City and we would expect the income level to be higher there.
So far, we have been using the terms salary and income interchangeably. The reality is that almost all mortgage brokers are independent, self-employed and working only on commission. They receive no salary. The use of the word salary is really not correct and you should think of a mortgage broker’s revenue solely as the income they earn from commissions on the sale of their products, mortgages.
A mortgage broker acts as an intermediary between people who are seeking a mortgage, like home buyers, and those who are selling mortgages, like banks and finance companies. In theory, the mortgage broker takes into consideration all of the credentials of the home buyer. The mortgage broker considers factors such as income, credit rating, amount of mortgage desired, amount of the down payment, and the location and condition of the property, among other variables.
The mortgage broker then selects, from the list of banks and finance companies they represent, the one that is best suited to the buyer they are working with.
When the loan goes through for the mortgage broker’s customer, the broker is paid a commission from a loan origination fee or from points added on to the closing costs of the loan. The typical commission, as pointed out by The Loan Professor, is one half of one percent (0.5%) of the amount of the completed loan transaction.
Since the mortgage broker is working on a commission that is a percentage of the loans that they close, their annual income is going to be based on the number of loans that they sell multiplied by the dollar value of all of the mortgages. The size of these two factors are going to tie directly to the socio-economic status of the mortgage broker’s clients as well as the health of the real-estate market that the broker is in and how hard the mortgage broker works to generate new business and to complete transactions.
While there is no definitive listing of the best places for a mortgage broker to work in the United States, it makes sense that they would want to be in an active, lively and healthy real estate market. CNN.com has a top ten list of such cities for 2014. The cities that they list are, Richmond (Virginia), New Orleans (Louisiana), Fort Worth (Texas), Memphis (Tennessee), New York City, Hartford (Connecticut), Birmingham (Alabama), Tampa (Florida) and Oakland (California).
Of course, there can be pockets of wealth and vibrant, strong economic activity and related real estate market health and growth in any city, anywhere, that would lead to increased income for the mortgage broker. Similarly, the cities listed can have areas of economic despair that would make the mortgage broker’s business far less lucrative.
Rightly or wrongly, mortgage brokers have been portrayed as one of the villains in the housing market collapse and subsequent market crash of 2008. The mortgage brokers, it has been argued, recklessly pushed mortgages by the billions, in pursuit of ever larger commissions, onto those who could not afford them. This caused damage to the economy as a whole when those loans started going into default. The damage to the economy soon spiraled into more defaults, causing more and more economic distress to the economy of the United States and eventually leading to the collapse in 2008.
While this argument may or may not be true, and while others certainly participated in, and should share the blame for, the collapse of 2008, it is certainly the perception that mortgage brokers played a part. This perception has led to new laws and regulations for the mortgage broker industry, which has made the industry as a whole, less profitable.
Further, in the aftermath of the economic crisis of 2008, it became almost impossible to obtain a mortgage anywhere at any price. The loan market had dried up. Liquidity was at almost zero. Many mortgage brokers moved on to other occupations because it became so impossible to make a living as a broker.
In 2006, the National Association of Mortgage Brokers reported having roughly 25,000 members. Today, that figure is closer to 5,000. This large drop is seen as partly having to do with just how difficult it became, and arguably still is, to get a mortgage loan in the wake of the 2008 disaster. Without banks being willing to lend, home sales plummeted and so too did mortgage brokers income.
In fact, the Bureau of Labor Statistics estimates that as housing boom turned to housing bust, the number or mortgage brokers dropped by a huge 50%.
It became less and less lucrative to stay in the business, so many mortgage brokers, including the more marginal producers, moved on.
The other factor that has decreased the number of working mortgage brokers is the new laws and regulations that went into effect in 2011 and at the beginning of 2014. These regulations were designed to curb some of the perceived misdeeds in the mortgage broker industry.
In 2010 the Dodd-Frank Wall Street Reform and Consumer Protection Act made it law that a mortgage broker could only receive a commission from one party to each transaction. Previously, the mortgage broker had been able to charge a fee to both the borrower and the lender. The new law effectively cut mortgage broker’s commission in half.
The law also ruled that mortgage brokers could only receive their 0.5% commission on the actual amount of the loan. This caused a further drop in mortgage broker’s income. Many left the industry as a result.
In 2011, the Federal Reserve put into place compensation rules along the same lines.
More recently, in 2013 the Consumer Financial Protection Bureau finalized the laws implementation by issuing it’s own regulations and giving mortgage broker’s until the start of 2014 to make changes in their practices and to be in full compliance with the law.
At the same time, some banks, including giants Wells Fargo and Bank of America, have stopped doing business with mortgage brokers. The banks site reasons such as the difficulty in controlling negotiations with independent contractors for their action.
The effect has been to decrease both the number of mortgage brokers still in business and their average income as well. Critics of the new regulations argue that a decrease in the number of mortgage brokers will make it more difficult for consumers to find appropriate financing for their home purchases. Consumers will now have to shop among and between the hundreds of options for financing that are available and may not find the best financing or any financing at all.
Essentially, the consumers now have to do the job that the mortgage broker once did. This increases the difficulty in obtaining a loan in a time when getting the loan is relatively more difficult to begin with.
Since the financial crisis of 2008, the number of mortgage brokers has seen a sharp decline. It has become increasingly more difficult thanks to new, and arguably necessary, regulations for those remaining to keep their income at current levels. There may still be further declines in the number of working mortgage brokers.
But the mortgage broker does perform a necessary, for some people critical, function in the home purchase process. Without the mortgage broker, many home buyers might not find the best financing, if they find financing at all. It seems likely that economic conditions and new regulations have already driven marginal, shady mortgage brokers out of business. Those remaining in business would therefore be more reputable, upstanding and unlikely to be going out of business soon. It seems unlikely, therefore, that average mortgage broker salary levels are going to decline much further. In fact, with increased demand on those that remain, average income levels might even go up.
Below is a video showing useful tips and tricks to being a successful mortgage broker.
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