Good afternoon ––
It's not easy running a mortgage lender. And it's especially difficult running one that's growing leaps and bounds in a market as competitive and chaotic as this one.
I sat down with Princeton Mortgage CEO Rich Weidel last week ostensibly to talk about his company making the Inc. 5000 list, but mostly I was curious about the operational pitfalls in building a company that goes from barely any business in 2017 to an expected $1.5 billion in 2021.
What jumped out at me was Weidel's perspective on how to incentivize workers, and what he argued was the delta in the mortgage industry between productivity and paychecks. Here's an excerpt from our conversation, which you can check out exclusively on HW+.
James Kleimann: Competition over the last year-and-a-half in the mortgage industry has been quite fierce. How do you find the right talent but not engage in a bidding war and blow all your capital? Or maybe you do?
Rich Weidel: I find that most companies pay unfairly. What I mean by that is that the delta between performance between average and top performer might be 5 or 6X, but the compensation delta might only be 15%. And so we've revamped over the last year or so our entire compensation model so that we have an incentive structure built for our team... essentially we pay top performers more than anybody else, but we pay average performers less than everybody else.
James Kleimann: Practically speaking, what does that look like?
Rich Weidel: Processing for example – for an average processor in the United States, I think it's about 25 units a month. And so we use some rough numbers, but let's say a processor [does] 25 units... that processor might earn an $800 bonus that month. And it winds up being something like a $350 cost per loan. Our top processors that might do 50 or 60 units can actually earn like a $7,000 bonus. And that process or cost per funded loan is only like $250 or $275.
From the beginning, we wanted to have a fewer, better-people model where we paid unfairly in that the people who really performed, we wanted to pay more than the market does. And the people who are average, we want to pay less than. And then that creates a situation where your average performers kind of work themselves out, because an average performer could leave Princeton and go make more money elsewhere. But a top performer would say, "I'm making more money at Princeton than I've made before." And it's actually the virtuous cycle of lowering our overall cost per funded loan.
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Until tomorrow –––
James Kleimann
HousingWire Managing Editor
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