December 2, 2020
By Saeed Ghaffari
When consumers and realtors know the function of and the role a loan officer, a loan processor and an underwriter plays in a mortgage application process, they make much more intelligent decisions when it comes to shopping for a loan and overcoming challenges.
There are many entities involved in getting a loan application started, processed and closed, to name a few, a lender, a title company, an escrow company, an appraiser and if it is a purchase transaction, then the real estate brokers, home inspectors, termite companies and the list goes on and on.
Within each entity, there are quite a few people performing specific tasks and they all are important and could affect the transaction in speed and cost.
The focus of this article is on the lender and the major players working for the lending institutions in the process, a loan officer/loan originator, a loan processor and an underwriter.
The loan application starts with a loan officer also known as a loan originator. This is an individual licensed by the state and registered by NMLS, the National Mortgage Licensing System. While loan officers are educated and trained to be loan consultants and loan advisors, they are also trained to be effective salespeople. More often than not, many of them are better salespeople than loan advisors at no fault of their own. The business world we are in calls for people to focus on sales and hone their sales skills more than their knowledge of their trait.
So a loan officer takes all the borrower’s info, analyses it, and comes back with a quote on rates and fees to the borrower and sells them on the benefits of working with him/her as opposed to with someone else.
So as a consumer, you need to be mindful of the fact that the person you are dealing with, the loan officer is a salesperson first and his income is more than 90% of the time based on the commission he/she makes on your transaction.
Once you are sold and the application is turned in with all the regulatory state and federal disclosures, starts the job of a loan processor. A loan processor is more of an administrator and a coordinator of the transaction. His/her job is to authenticate the information on the application by verifying them through legal documents or obtaining 3rd party such as employers, banks and IRS verifications, to coordinate the services required by an escrow company, title company, an appraiser and obtaining documents and reports from them and packaging them for the next step in the process.
Most loan processors are on salary and a small bonus from closed transactions. Some are independent contractors and charge between $500 to $900 per closed transaction for their services. They are not in sales, but are incentivized to do a good job and close files as fast and smoothly as possible. Some processors interact with consumers and some don’t, unless they have to at a critical juncture when it’s necessary. Once all information is verified and reports from third party companies obtained, the loan package is electronically transmitted to an underwriter for underwriting, which is the final step in getting a loan approved.
The underwriter wears the hat of an inspector. His/her job is to look through the file with a fine tooth comb and search for any red flags, inconsistencies and noncompliance with the loan program guidelines. Although the loan may have been pre-approve, even by an underwriter, it is not fully approved until it is reviewed with a magnifier glass and the fine tooth comb by an underwriter in a senior position. Understanding the underwriters will be without jobs unless they are closing transaction, nonetheless, their main function is to protect the lender against misrepresentation, fraud and making sure the client has the ability to pay back the loan and the property and borrower’s employment, income, assets and credit history meet their lending criteria. This means if necessary, sometimes reversing the loan approval issued earlier on the 11th hour. Some underwriters overprotect the lender by scrutinizing the file too much and over documenting the file. This only can be minimized through relationship and dancing to their tunes, I learned long time ago not to mess around with people in authority.
So now you know the 3 major role players, the salesperson, the administrator and the inspector. At the end of the day, real estate and lending is people’s business. As a consumer or a realtor, you never come in contact with underwriters. The loan officer is the person you come in contact with first and most through the transaction and you want to be working with someone who has experience, knowledge, high moral standards, friendly personality and good sales techniques. If these attributes come across when they deal with you, they will also come handy when they manage their loan processors and work on your file with an anal underwriter.
In our efforts to bring you transparency, literacy and connection, I hope the information on this article comes handy next time you are dealing with a lender in a refinance or a purchase transaction.
Knowing some loan officers are more of a salesperson than a loan advisor, I will be happy to connect you with the right person based on your needs and challenges. Feel free to reach out to me for all your real estate and mortgage needs.
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