For most people, buying a home or investment property is the largest financial transaction they will ever experience. Consequently, it is little surprise that obtaining a mortgage is among the most stressful events home buyers will suffer. Interfacing with large banks and finance companies can be—at once—intimidating, confusing and frustrating. Recognizing this, financial institutions ordinarily put a human face on their products and processes.
This face is the loan officer, who takes the application and shepherds the borrowers through the underwriting, approval and settlement of the loans. Ideally, the loan officer can answer any questions and resolve any problems that come up. On a practical level, the loan officer can direct the borrowers to the responsible parties who, in turn, assist in clarifying matters. Through it all, the loan officer educates, pre-qualifies, advocates, coordinates and follows up. These five tasks comprise the core of the job.
What Is a Loan Officer?
A loan officer is a sales professional. He or she prospects for customers and persuade them to apply for a mortgage loan through his or her bank. She finds customers through referrals and networking with realtors and attorneys; direct advertising through newspaper ads, billboards and online publicity; and social media.
The loan officer assesses the prospect’s needs and financial position, and fit them to a loan product. Interest rates are difficult for a bank to lower without requiring additional payment (known as “points”) by borrowers. Accordingly, loan officers will sell service, i.e. lower fees, quicker closings and more personal attention.
Whom Does the Loan Officer Serve?
Representing the lender to the borrower (and, to a lesser degree, borrower to lender), the loan officer is the customer’s principal resource for information and action. Financial institutions are often large and impersonal so a single resource person is easier for those purchasing or refinancing a property than a thick ream of written information and long list of operations personnel.
A loan will be seen by many eyes and will cross many desks before it arrives at settlement. Each of those stops represents a potential problem or delay. Rather than trying to locate the exact person to resolve a delay, a borrower will depend on the loan officer to get to the bottom of the issue. In this way, loan applicants are not overwhelmed by an organization and operations personnel are not bombarded with phone calls. Thus the loan officer helps to streamline the approval process.
How Does the Loan Officer Serve the Client?
A good loan officer takes care of the borrower, and thereby enhances the reputation of the financial institution. First of all, the L.O. (to use an in-house term) explains thoroughly and honestly the process through which the customer will go. Of course, mortgage lending is not an exact science so this explanation may estimate dates and costs without precision. Still, the L.O. will explain how the bottom line is affected by many variables thereby preventing little surprises from turning into big ones.
Among the many ways a loan officer serves the client are:
- Following Up;
Five Roles of Loan Officers
Before a loan application is signed, the loan officer is obliged by law to disclose (to a reasonable degree) just how much the loan will cost the borrower. The L.O. must present a Good Faith Estimate (GFE) and Truth-in-Lending (TIL) disclosure. These documents include estimated closing costs and the monthly payments of principal and interest amortized over the term of the loan. Such numbers and documents can be confusing so the loan officer must explain how the figures were arrived at and how they oblige the borrower. In addition, the L.O. explains how a loan is evaluated and what documentation is needed.
Customers are not eager to pay application fees and gather all kinds of paperwork only to be rejected by their bank. To decrease the likelihood of this scenario, the loan officer is charged with prequalifying the borrower, i.e. underwriting the loan based on stated information in advance of documented financial data. Some borrowers have a good handle on their financial picture while others pay less attention so pre-qualification does not always tell the whole story in terms of length of employment, financial assets, total income and monthly obligations (although the L.O. will normally run a credit report as part of the evaluation).
Loan files can land in piles on the desks of processors, underwriters and, later, closing coordinators. Sometimes, the rise from the bottoms of those piles is slow, given the emergencies and management directives given to operations staff. Difficult as it is, loan officers must sometimes play the pest in order to move the application through.
To get a mortgage loan approved, the borrower must submit documented evidence of financial representations made during prequalification. The loan officer will often collect these documents up front and forward to the processor, who reviews them before sending to an underwriter. If the paperwork is invalid due to deficiencies in form or due to expiration, the L.O. must go back to the borrower for updates. The same applies after approval when the closers require insurance, employment verifications and title preconditions.
5. Following Up
After a loan closes and monies are disbursed, a competent loan officer will stay in touch with the borrower, particularly if a servicing issue comes up. If there is a discrepancy between the payment indicated on the closing documents and that being requested by the servicer, the loan officer should take the lead in rectifying the problem.
Since the loan officer wears many hats, experience is a quality every borrower should look for. Laws and regulations are always changing relative to the financial sector. These changes affect the course of mortgage loans and the duration between application and closing. The seasoned L.O.s respond to these variables with skill and resourcefulness.
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