HUMAN RESOURCE MANAGEMENT – DES MOINES

Citi Home Equity

Compensation Analysis

Prepared for

Mr. Dennis Schrag

The University of Iowa

Henry B. Tippie College of Business

Prepared by


William Dowell

Joseph Grace

Trista Ide

Paul Stover

Brian Velky

Brad Willemsen


Company Background

        Citi Home Equity (CHE), a division of CitiMortgage under the Citigroup umbrella, was founded in 1999.  Citigroup is the world’s largest financial institution, with operations in more than 100 countries, approximately 200 million customer accounts, and approximately 300,000 employees.  Citigroup is currently one of the 30 companies that make up the Dow Jones Industrial Average.

        CHE currently operates from Des Moines, Iowa; O’Fallon, Missouri; and Southfield, Michigan; and contracts a portion of the work to two companies in India.  CHE employs approximately 160 direct-to-consumer Telesales Lending Consultants (TLC’s) at the Iowa and Missouri call center locations.  Turnover at these locations has traditionally been low and morale is generally good.  CHE is currently expanding its operations, even in the wake of a national real estate market slow down.  CHE direct-to-consumer TLC’s currently book between $600 and $700 million in monthly home equity loans and lines of credit from U.S. home-owner borrowers.

Current Situation

TLC’s at CHE receive a base salary, plus incentive commission that is based on ‘booked’ (completed) loan originations.  The current method of determining the salesperson’s commission is a shortcoming that affects: 1) the TLC’s general attitude about the relative opacity of how incentive pay can be predicted and affected, and 2) may be a factor in the relative ‘fairness’ of how loan applications are registered and processed.  Compliance with fair lending laws is essential and must be addressed within the current system of compensation as well as any revised compensation system that is proposed.

The current compensation method takes into account how the salesperson performed on several key criteria.  TLC’s are quantitatively and qualitatively judged on performance related to four key factors:

  1. Percentage of applications taken that close
  2. Percentage of credit line and loan dollars utilized at origination
  3. Call quality score for overall performance, excluding mandatory disclosures
  4. Call quality pass/fail rate for mandatory disclosure items

How the TLC’s perform on these factors affects how many basis points (bps) are multiplied into a salesperson’s ‘total booked dollars.’  This calculation is predominately what determines the TLC’s incentive pay.  For instance, if a salesperson ‘books’ $5,000,000 for a month and achieves the maximum score by all standards as outlined above, 4 bps are earned.  Thus, the TLC earns $2,000 ($5,000,000 * 0.0004 = $2,000) in incentive pay.  

In addition to this measure, another shadow system is used to further increase commission pay, called ‘pool money’.  Pool money is allocated for incentive pay, but is ‘unearned’ under the previous calculation.  Pool money is distributed to TLC’s based on how much his or her booked loans contributed, percentage-wise, to the overall department’s total booked loans.  This dual compensation system, which is based on dollar amount of booked loans as well as other subjective components, makes accurately predicting incentive pay very time-consuming, if not nearly impossible, leading to frustration among the TLC team.

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In addition to employee frustrations related to the current compensation system, there are two key pieces of legislation that pose a threat to CHE.  The Fair Housing Act includes a provision stating it is unlawful for an entity to discriminate against any person on the basis of race, color, religion, sex, handicap, familial status, or national origin.  The Equal Credit Opportunity Act (ECOA) governs the actions an institution takes in determining creditworthiness of an applicant.  The ECOA also prohibits discrimination based on sex, marital status, age, race, national origin, or because the applicant receives public assistance.  Thus, these guidelines are ...

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