Deferred Compensation: A Mortgage Industry Retention Strategy

The management of talent and leadership are hot-list mortgage industry issues, outpacing concerns over technology, process improvement or even the need to cut operating costs.[1]

The National Mortgage Professional recently recapped a 2025 New England Mortgage Expo panel discussion that examined mortgage industry best practices for recruiting and retaining key talent. During the discussion, a senior mortgage banking litigator stated that the success of producers determines the true value of a mortgage company. However, as the panel observed, a valued mortgage company production team goes quickly from asset to liability if team members leave for a competitor.

The panelists agreed that mortgage companies must avoid recruitment risks to maintain operational stability. Successful companies must establish strong employer-employee relationships that protect their top producers from being recruited.

As a senior advisor in the industry stated in a 2024 commentary on mortgage companies adjusting loan officer compensation to improve profitability, "The largest expense for most (mortgage) companies isn't the new loan origination system, marketing campaigns or rent. It is compensation."

Mortgage Company Challenges

Retention and compensation issues are not unique to the mortgage industry. Still, the industry does, more quickly than many verticals, take hard hits from the ebb and flow of the economy. The Mortgage Lender Sentiment Survey® (MLSS), published annually by Fannie Mae's Economic & Strategic Research Group, describes current external challenges of the mortgage industry, calling out:

• Home price appreciation
• Elevated interest rates
• Sticky inflation
• Tight inventory of homes for sale
• Slowdown of global economic growth

Facing multiple challenges beyond their control, mortgage companies can't afford the added vulnerability of losing key personnel or struggling to attract the next generation of top producers.

Deferred Compensation Strategies Targeted for the Mortgage Industry

Well-designed executive benefits plans can be effective tools to help mortgage companies attract talented employees and keep leadership and producers committed to the firm for the long haul. Options to informally fund deferred compensation plans or manage them as an unfunded liability add flexibility that can be highly beneficial in offsetting the mortgage industry's inevitable economic ups and downs.

Nonqualified deferred compensation plans permit employers to offer attractive benefits to a select group of employees. With no statutory limits on the amount of compensation that can be deferred into a plan, nonqualified plans, contingent on their design, offer the potential for deferring salary, bonuses (either performance-based or incentive), negotiated compensation, commissions and even 1099 compensation.

In addition to enabling the mortgage company to provide added savings or retirement benefits to a select set of key employees, rewards can be tied to the company's long-term success. Plan design could include the use of phantom stock, restricted stock awards (RSAs), restricted stock units (RSUs), stock appreciation rights (SARs), incentive stock options (ISOs) and nonqualified stock options (NSOs). Options to tie awards to the employee's reward to performance as well as duration of service help position mortgage companies to inspire greater loyalty from mission-critical leadership and producers.

Loyalty is a Two-Way Street: Benefits Education Communicates Employer Commitment

Thorough and informative communication strategies help plan participants understand and confidently utilize the executive benefits available to them. When executive benefits consultants support plan sponsors with educational tools, plan participants see the commitment their employer is making to their financial wellness. They have tangible confirmation that the company they work for is proactively supporting their personal financial goals.

Employers selecting an executive benefits team to help them better attract and retain talent should look for a team ready to partner with them on employee benefits education. They could also look for:

• Executive benefits consultants who work with a diversity of product providers to selectively customize plans to support the objectives of the mortgage company as the plan sponsor.
• Teams who have experience that is both broad and deep in the design and implementation of nonqualified deferred compensation and other executive benefits strategies.

To learn more about executive benefits, read Reasons to Reevaluate Your Rabbi Trust, How the 2025 Retirement Plan Limits Impact Highly Compensated Employees, and How Changes to Dodd-Frank Clawback Policies May Affect Your NQDC Plan.

Source: [1]Mortgage Lenders Cite Talent Management and Cost-Cutting as Top Priorities

This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, accounting, legal or tax advice. Any tax advice contained herein is of a general nature. You should seek specific advice from your tax professional before pursuing any idea contemplated herein. The examples shown are for illustrative purposes only. The material in this report may contain financial illustrations, which may reflect hypothetical dividends, interest, rates of return, and/or expense and mortality assumptions, none of which are guaranteed.

Kenny DePaola is affiliated with Valmark Securities, Inc. Securities offered through Valmark Securities, Inc., member FINRA, SIPC. 130 Springside Drive, Suite 300, Akron, OH 44333. 800-765-5201. OneDigital is a separate entity from Valmark Securities, Inc.

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