What Is a Broker Cap?
- In the wholesale/broker channel, a "broker cap" is the maximum origination fee a mortgage broker can charge a borrower on a loan
- Set by the broker company's agreement with each wholesale lender
- NEXA Lending's broker cap: 275 basis points (2.75% of the loan amount)
- This is the gross amount — the LO doesn't keep all 275 bps (explained below)
- The broker cap exists because federal regulations (Dodd-Frank/RESPA) limit total loan origination charges, and each lender sets its own maximum
What Are Basis Points?
- 1 basis point (bps) = 0.01% of the loan amount
- 100 bps = 1.00%
- 275 bps = 2.75%
- On a $400,000 loan at 275 bps: $400,000 × 0.0275 = $11,000 gross broker compensation
- On a $600,000 loan at 275 bps: $600,000 × 0.0275 = $16,500 gross broker compensation
How the 275 BPS Cap Works at NEXA
The 275 BPS is the gross margin charged to the borrower, but the loan officer doesn't keep all of it. Here's the breakdown:
Standard Broker Loans
- Gross margin charged to borrower: 275 bps
- NEXA overhead deduction: −25 bps (covers compliance, licensing, E&O, admin)
- NEXA 12% profit deduction: −33 bps (275 × 12% = 33 bps)
- LO effective comp: 217 bps (on standard broker loans)
NEXA100 Qualifying Lenders
On NEXA100 lenders (UWM, PennyMac, MLB, Deep Haven, Finance of America Reverse):
- Gross margin: 275 bps
- NEXA overhead: −25 bps
- NEXA profit: Returned to LO ✓
- LO effective comp: 250 bps
Dollar Examples
| Loan Amount | 217 bps (Standard) | 250 bps (NEXA100) |
|---|---|---|
| $300,000 | $6,510 | $7,500 |
| $400,000 | $8,680 | $10,000 |
| $500,000 | $10,850 | $12,500 |
| $600,000 | $13,020 | $15,000 |
| $750,000 | $16,275 | $18,750 |
Why 275 BPS and Not Higher?
- NMLS/federal regulations cap total loan origination charges at 3% of the loan amount for most loan types (QM rule)
- Lenders also cap the broker fee in their wholesale agreements for compliance and pricing reasons
- NEXA's 275 bps cap is among the highest available in the broker channel
- Some lenders cap at 200-250 bps — NEXA's 275 cap maximizes LO earning potential within legal limits
How the Broker Cap Compares to Retail
- Retail LOs don't operate under a "broker cap" in the same way — the company charges what it wants and pays the LO a split
- Typical retail: company charges 200-250 bps, pays LO 75-150 bps (rest goes to company)
- Broker at NEXA: charges 275 bps, pays LO 217-250 bps (only 25-58 bps goes to NEXA)
- The broker model returns 80-90% of origination revenue to the LO vs 30-60% in retail
Can You Charge Less Than 275 BPS?
- Yes — LOs can charge borrowers any margin up to the 275 bps cap
- Lower margin = lower rate for borrower = more competitive pricing
- LOs often adjust margin based on loan size, borrower relationship, and competitive situation
- On large loans ($700K+), LOs sometimes reduce margin to stay competitive on rate while still earning significant income
What Is NEXA100 and How Does It Affect the Cap?
- NEXA100 is NEXA's program that returns the 12% profit margin to the LO on qualifying lenders
- On NEXA100 lenders: LO keeps 275 bps − 25 bps overhead = 250 bps (instead of 217 bps)
- That 33 bps difference on a $400K loan = $1,320 more per loan
- At 20 loans/year at $400K avg: NEXA100 = $26,400/year more than standard broker comp
- Qualification: maintain 1 producing LO in your Level 1 downline (or new LOs get it free for first 6 months)
Annual Income Examples at Different Volume Levels
Here's what you can expect to earn at different annual production volumes:
| Annual Volume | Earning at 217 bps | Earning at 250 bps (NEXA100) |
|---|---|---|
| $2M | $43,400 | $50,000 |
| $5M | $108,500 | $125,000 |
| $10M | $217,000 | $250,000 |
| $15M | $325,500 | $375,000 |
Frequently Asked Questions
What is a mortgage broker cap?
A mortgage broker cap is the maximum origination fee a mortgage broker can charge a borrower on a loan. It's set by the broker company's agreement with each wholesale lender and exists to comply with federal regulations like Dodd-Frank and RESPA.
What does 275 BPS mean for a loan officer?
275 basis points means 2.75% of the loan amount. On a $400,000 loan, 275 BPS equals $11,000 in gross broker compensation before overhead and profit deductions.
How much does a loan officer make on a 275 BPS loan?
The LO doesn't keep all 275 BPS. After NEXA deducts 25 BPS for overhead and takes a 12% profit margin (33 BPS), the LO typically earns 217 BPS on standard loans. On NEXA100 qualifying lenders, the LO earns 250 BPS.
Is NEXA Lending's 275 BPS cap the highest in the industry?
NEXA's 275 BPS cap is among the highest available in the broker channel. Some lenders cap at 200-250 BPS, so NEXA's 275 cap maximizes LO earning potential within legal limits (the federal QM rule caps total origination charges at 3%).
What is the difference between 275 BPS and NEXA100?
The 275 BPS is the broker cap—the maximum origination fee charged to the borrower. NEXA100 is a program that returns the 12% company profit margin to the LO on qualifying lenders, increasing effective compensation from 217 BPS to 250 BPS per loan.
Can I charge less than 275 BPS to borrowers?
Yes, loan officers can charge any margin up to the 275 BPS cap. Lower margins make the borrower more competitive on rate. LOs typically adjust margin based on loan size, borrower relationship, and competitive situation in their market.
How does the broker cap compare to retail loan officer comp?
Broker at NEXA: charges 275 BPS, pays LO 217-250 BPS (only 25-58 BPS to NEXA). Typical retail: company charges 200-250 BPS, pays LO 75-150 BPS. The broker model returns 80-90% of origination revenue to the LO vs 30-60% in retail.
What is NEXA's overhead deduction and what does it cover?
NEXA deducts 25 BPS from the 275 BPS cap to cover essential business expenses: compliance and regulatory requirements, NMLS licensing, E&O (errors & omissions) insurance, and administrative infrastructure that supports your business.
Want to See What 275 BPS Means for Your Actual Volume?
Book a free 20-minute call. I'll run the comp math for your specific production numbers — and show you exactly what you'd earn at NEXA vs. your current setup.
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