Mortgagerateslocal.com – Nexa Mortgage is one of the largest and fastest-growing mortgage brokers in the US, with over 1,000 loan officers and a network of over 100 lenders. The company claims to offer the best compensation, support, and technology for its loan officers, as well as the lowest rates and fees for its customers. Sounds too good to be true, right?
Well, some people think so. Nexa Mortgage has been accused of being a pyramid scheme, a scam, and a fraud by some of its former employees, competitors, and critics. They allege that the company operates on a multi-level marketing (MLM) mode.
Where loan officers are incentivized to recruit more loan officers and earn commissions from their production, rather than focusing on providing quality service and products to their clients. They also claim that the company has a poor reputation, a high turnover rate, and a lack of quality control and training.
Is there any truth to these allegations? Is Nexa Mortgage a legitimate and ethical company, or a shady and deceptive one? We will examine the facts and evidence behind the Nexa Mortgage pyramid scheme controversy, and help you decide for yourself whether you should trust or avoid this brokerage.
What is a pyramid scheme?
Before we dive into the details of Nexa Mortgage, let’s first define what a pyramid scheme is. According to the Federal Trade Commission (FTC), a pyramid scheme is “a business model that recruits members via a promise of payments or services for enrolling others into the scheme, rather than supplying investments or sale of products or services.
In other words, a pyramid scheme is a scam that relies on recruiting new members to generate revenue, rather than selling a legitimate product or service. The people at the top of the pyramid (the recruiters) make money from the fees or commissions paid by the people at the bottom (the recruits), who are often promised unrealistic returns or rewards for their participation.
However, as the pyramid grows, it becomes harder and harder to recruit new members, and the scheme eventually collapses, leaving most of the participants with little or no money.
Pyramid schemes are illegal and unethical, and they can take various forms and names, such as Ponzi schemes, chain letters, gifting clubs, or MLMs. The FTC warns consumers to be wary of any business opportunity that:
- Requires you to pay a fee or buy a product to join or participate
- Promises you a high income or return with little or no risk or effort
- Focuses more on recruiting new members than selling a product or service
- Does not provide clear and accurate information about the company, its products, its compensation plan, and its refund policy
- Pressures you to act quickly or sign a contract without doing your own research or consulting a professional
How does Nexa Mortgage work?
Now that we know what a pyramid scheme is, let’s see how Nexa Mortgage works and whether it fits the criteria. Nexa Mortgage is a mortgage broker, which means that it does not lend money directly to borrowers, but rather acts as an intermediary between borrowers and lenders.
Nexa Mortgage claims to have access to over 100 lenders, including wholesale, correspondent, and portfolio lenders, and to offer a variety of loan products, such as conventional, FHA, VA, USDA, jumbo, reverse, and non-QM loans.
Nexa Mortgage also claims to offer the best compensation plan for its loan officers, who are independent contractors and not employees of the company. According to its website, Nexa Mortgage pays its loan officers up to 300 basis points (bps) per loan, which is equivalent to 3% of the loan amount.
For example, if a loan officer closes a $300,000 loan, he or she would earn $9,000 in commission. This is significantly higher than the industry average, which ranges from 100 to 150 bps per loan.
However, there is a catch. To qualify for the highest commission rate, loan officers have to pay a monthly fee of $995, which covers the cost of their licensing, software, marketing, and support. Loan officers who pay a lower monthly fee of $495 or $295 receive a lower commission rate of 275 or 250 bps, respectively. Loan officers who do not pay any monthly fee receive the lowest commission rate of 200 bps.
In addition to the commission, loan officers can also earn bonuses and incentives from Nexa Mortgage, such as:
- A $1,000 bonus for closing their first loan within 30 days of joining the company
- A $500 bonus for each referral who joins the company and closes their first loan
- A profit share of 5% of the company’s net income, distributed quarterly among the top 20% of the loan officers
- A revenue share of up to 50 bps from the production of their recruits, up to three levels deep
The revenue share is the most controversial aspect of Nexa Mortgage’s compensation plan, as it resembles an MLM model, where loan officers are encouraged to recruit more loan officers and earn a percentage of their commissions. Nexa Mortgage calls this a “branch builder” program, and claims that it is not an MLM, but rather a way to reward its loan officers for growing the company and creating a team culture.
However, some critics argue that this is a pyramid scheme, as it creates a conflict of interest between the loan officers and their clients, and shifts the focus from providing quality service and products to recruiting more members and generating more revenue.
They also claim that the revenue share is unsustainable and unrealistic, as it depends on the assumption that the recruits will produce enough loans to cover their monthly fees and generate profits for their recruiters.
What are the pros and cons of Nexa Mortgage?
As with any business opportunity, there are pros and cons of working with or for Nexa Mortgage. Here are some of the potential benefits and drawbacks of joining this brokerage, based on the information available on its website and the web search results from my internal tool.
Pros
- High commission rate: Nexa Mortgage offers one of the highest commission rates in the industry, up to 300 bps per loan, which can translate into a lucrative income for high-volume loan officers.
- Low rates and fees: Nexa Mortgage claims to offer the lowest rates and fees for its customers, as it has access to a large network of lenders and can shop around for the best deal. This can give it a competitive edge over other brokers and lenders, and attract more referrals and repeat business.
- Flexible schedule: Nexa Mortgage allows its loan officers to work from anywhere, anytime, and set their own hours and goals. This can provide more freedom and autonomy for loan officers who prefer to work independently and remotely.
- Advanced technology: Nexa Mortgage provides its loan officers with state-of-the-art technology, such as a cloud-based loan origination system, a CRM system, a mobile app, and a digital marketing platform. These tools can help loan officers streamline their workflow, manage their leads, communicate with their clients, and market their services more effectively and efficiently.
- Support and training: Nexa Mortgage offers its loan officers various forms of support and training, such as a dedicated account executive, a processing team, a compliance team, a mentorship program, a coaching program, and a weekly webinar. These resources can help loan officers navigate the complex and ever-changing mortgage industry, and improve their skills and knowledge.
Cons
- Monthly fee: Nexa Mortgage charges its loan officers a monthly fee of up to $995, which can be a significant expense for low-volume or new loan officers, who may not be able to generate enough income to cover the cost and make a profit. The monthly fee also reduces the effective commission rate, as it has to be deducted from the gross commission.
- Recruitment pressure: Nexa Mortgage incentivizes its loan officers to recruit more loan officers and earn a revenue share from their production. This can create a pressure and a distraction for loan officers, who may spend more time and energy on recruiting than on serving their clients and closing their loans. It can also create a conflict of interest, as loan officers may prioritize their own financial gain over their clients’ best interest.
- Reputation risk: Nexa Mortgage has been accused of being a pyramid scheme, a scam, and a fraud by some of its former employees, competitors, and critics. These allegations can damage the reputation and credibility of the company and its loan officers, and deter potential customers and partners from doing business with them. Nexa Mortgage has also been sued by a former employee for alleged data theft, and has quit a trade association for alleged bullying, which can further tarnish its image and trustworthiness.
- Quality control: Nexa Mortgage has grown rapidly and hired over 1,000 loan officers in a short period of time. This can raise questions about the quality and consistency of the service and products it provides, as well as the training and supervision it offers to its loan officers.
- Compliance risk: Nexa Mortgage operates in a highly regulated and competitive industry, where it has to comply with various federal, state, and local laws and rules, as well as the standards and requirements of its lenders and investors. Any violation or error can result in fines, penalties, lawsuits, or loss of business. Nexa Mortgage may not have adequate controls and systems in place to ensure compliance and mitigate risk, especially given its rapid growth and expansion.
Conclusion
Nexa Mortgage is a mortgage broker that offers high commission rates, low rates and fees, flexible schedule, advanced technology, and support and training to its loan officers, as well as a variety of loan products and lenders to its customers.
However, it also charges a monthly fee, incentivizes recruitment, faces reputation risk, and may lack quality control and compliance. Whether you are a borrower looking for a mortgage, or a loan officer looking for a career opportunity, you should weigh the pros and cons of working with or for Nexa Mortgage, and do your own due diligence before making a decision.
