5 Things About a Mortgage Loan Officer You May Not Have Known
Although they may seem like pretty common things, these simple facts are often forgotten about the Mortgage Loan Officer:
- Loan officers go through a rigorous review process
- They aren’t always employed by Banks
- Loan officers aren’t always paid by commission
- MLOs work directly with buyers
- There are different types of loan officers
Loan Officers Go Through a Rigorous Review Process
Mortgage loan officers must go through a stringent process before they are allowed to take on the role's duties. While background checks and considerations about their ethical history have always been a part of the vetting process, the subprime lending crisis of 2008 caused a tightening of the standards of employment in the lending industry. Mortgage loan officers must go through several hours of coursework and pass the challenging 190-minute SAFE MLO exam.
In addition to pre-licensing work, background checks, and credit checks, MLOs must also register with the National Mortgage Licensing System (NMLS), pay appropriate fees, and even obtain a surety bond. What’s more, each year, these professionals must complete 8 hours of continuing education courses. In short, being a mortgage loan officer is a position of great consequence meant for committed and ethical individuals.
They Aren’t Only Employed By Banks
While most mortgage loan officers are employed by banks, credit unions, and other financial institutions, there are many who work for independent mortgage loan companies or real estate firms, too. Mortgage loan officers can also work as mortgage brokers that work with several different lenders and help prospective borrowers shop around for the most favorable terms. Brokers can work independently or for a larger brokerage firm and are intermediaries between borrowers and lending institutions.
Loan Officers Aren’t Always Paid Commission
Another misconception about mortgage loan officers is that they all are paid a commission depending on the amount of each loan they close. While commission is a part of the pay for many mortgage loan officers, there are MLOs that earn a salary or are paid on a structured compensation plan. How these professionals are paid depends on their state and what type of organization they are employed by.
MLOs that work for banks or other large lending institutions often earn a salary and commission. Officers working for smaller brokerages may be paid totally on commission, and that amount is often factored into the loan's interest rate.
It is important to note that since the 2008 SAFE (Secure and Fair Enforcement) Act, mortgage loan officers’ pay cannot be based on the loan terms.
Mortgage Loan Officers Work Directly with the Borrowers
Mortgage loan officers are often believed to be background players in the homebuying process; however, they often work directly with borrowers. In addition to communicating with prospective borrowers about financial documents, credit verifications, and other requirements for obtaining a mortgage loan, MLOs also act in a customer service capacity by answering questions and guiding customers through the lending process.
The process of applying and getting approved for a mortgage can be overwhelming. MLOs have many responsibilities, one of which is to maintain consistent communication with customers to facilitate a smooth and timely closing. Direct interaction with borrowers is a primary obligation of the job.
There Are Different Types of Loan Officers
Just as there are distinct types of loans, there are different types of loan officers. Mortgage loan officers may have a niche or specialty in the types of loan products they help customers navigate. For example, an MLO may specialize in working with veterans to get VA loans. Low and moderate-income rural homebuyers may seek MLOs who are well-versed in USDA loans. Real estate agents will often refer their clients to a mortgage loan officer that they believe are best suited to cater to their clients’ specific lending needs.
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