Compensation packages for loan officers and executives at commercial banks are much more generous than at mortgage banks, and could cause conflicts and some defections as banks acquire mortgage businesses, compensation experts say.
While the potential frictions are not so large as to be deal killers, experts believe, they may prove to be jolting. Commercial banks have been shifting gradually to incentive-based pay, and this could set the stage for smoother transitions.
"Commercial institutions have basically said, 'we want to look like a mortgage bank, we want to sell like a mortgage bank, we want to go after business like them'" said Allen Gutterman, president of Response Professional Placement, a New York employment consultant.
Mortgage banks pay loan officers and executives salaries based heavily on incentives. Few offer plum benefits or hearty based salaries.
During the height of the home-loan refinancing boom, incentives paid to some top-gun loan officers at mortgage banks topped $500,000.
But some commerical banks created pay schemes that made it impossible for loan officers to earn more than $75,000, Mr. Gutterman said.
The pay disparity can be equally glaring at the executive level.
A study performed last year by Carl D. Jacobs & Associates, Woodland Hills, Calif., found that chief executives of independent mortgage companies were paid an average of $452,600, a year, or 71% more than their counterparts at bank-owned mortgage companies.
For 1993, according to an American Banker survey, the highest-paid executive among publicly held mortgage banking companies was Lee E. Shelton, vice chairman of Resource Bancshares Mortgage Group Inc. He earned cash compensation of more than $1.5 million, 84% from bonuses.
Closing the Gap
While banks may not be doling out paychecks like that anytime soon, they may be moving to narrow the pay gap.
Mr. Gutterman said banks are realizing that their pay packages salaries may be insufficient to retain top loan officers.
And already, banks generally offer better benefits than non-bank rivals.
Commercial banks are more likely than mortgage banks to offer employees 401(k) programs, long-term disability insurance, comprehensive health and dental care, and tuition reimbursement, said Mr. Gutterman.
