With origination volume slumping, mortgage companies are not paying out the fat yearend bonuses that have been typical in the past. Bonuses that are half of last year's are not uncommon.

But very few members of the rank and file are looking for a new job as a result. In an industry that has seen volume drop by up to 50% and had staff reductions of a third or more, most people are glad to be working, even if their incomes may have been cut sharply.

"No one can really grumble, because we've had a decline in loan volume and there is a direct correlation between volume and bonuses," said Allen Gutterman, president of Response Professional Placement in New York. He said that "unless they are contacted," people are sitting tight and not looking to change jobs.

In October 1994, there were 228,600 people working in the mortgage industry, according to the Bureau of Labor Statistics, compared with 233,800 in October 1993 and 257,700 at the industry's peak in April 1994. With servicing volume still growing, the head count has not dropped for servicing employees, and this has cushioned the employment drop. The drop has been much more severe in production departments, in mortgage banking, and especially at mortgage brokerage companies.

During the refinancing boom of 1992 and 1993, compensation programs based on volume produced high bonuses. Too high, some banks thought, according to Carl D. Jacobs, president of Carl D. Jacobs & Associates, a compensation consulting firm for mortgage companies.

"Many companies have begun to reexamine the structure and levels of compensation for field production positions," Mr. Jacobs said. "In 1993 some bonuses were inappropriately large because they were based on volume and not profitability, so many are changing that now," he said.

Some lenders are now giving larger bonuses for the sale of a more profitable product. Others will base bonuses on increased department activity and better manpower utilization, Mr. Gutterman said.

"People are rewarded for cutting costs and getting a big piece of the market because it is shrinking," said Mr. Gutterman. He said bonuses are a great way to motivate and retain talented people.

Most lenders are trying to put together a more effective bonus program this year, said Mark Springer, president M.H. Springer Associates. "Some are putting together stock programs with half cash, half stock to keep executives," he said.

Chief executive officers' bonuses at nonsubsidiary mortgage companies averaged about half their base salaries in 1993. At the other extreme, the average for operations people is 5% to 10% of the base salary.

"Over the years, during slow times salaries tend to rise for a few select people to help compensate for the decrease in their bonuses," said Mr. Jacobs. This holds true for key executives and production staff, who depend on bonuses for a large part of their salaries.

Mr. Jacobs added that in consolidated mortgage companies some bonuses are linked to the performance of the parent company and not just the mortgage subsidiary, providing some relief for those employees when business is slow. But when surveyed, those in subsidiaries consider incentive programs tied directly to the subsidiary's performance more effective than those tied only to the parent company.

Robert C. Bristow, vice president for residential loan origination at First Tennessee Bank, Memphis, said low bonuses should not be a surprise for anyone. "We set up our performance goals way in advance, so we know what's coming," he said.

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