Mortgage banking posted a record $2 trillion worth of loans last year as consumers bought more homes and refinanced more mortgages than any time in history.
And while the real estate market is expected to cool this year, the Mortgage Bankers Associations of America still expects Americans to seek $1.77 trillion worth of loans this year, making it the third best on record.
Behind each loan is a coordinator whose job it is to make sure the loan process goes smoothly. That point person, often referred to as the mortgage loan officer or loan originator, is responsible for the sale of the home from the application stage to closing.
The record business has created a welcome challenge for loan officers. Scores of clients and millions of dollars worth of loans are being handled every day. And in most cases, brokers and bankers have enjoyed a market that brings clients to them since historically low mortgage rates have pushed more consumers to consider refinancing or buying a new home.
Experts said consumers should ask plenty of questions and shop around before hiring the person who will see the mortgage loan through settlement. Finding the right loan program often can save a consumer money.
And industry leaders are encouraging their members to prepare for a slight slowdown and search for business the old-fashioned way.
"Our biggest challenge we've had over the last year is trying to maintain a high level of customer service and at the same time dealing with the volume of business we've had coming in," said Guy Silas, a vice president with Sandy Spring Bank. "It's not just ourselves that are part of the process. There are various pieces of the puzzle that have to all fit in. We're responsible for coordinating all of that, but we need to do so and still meet our clients' expectations."
Silas said it wasn't that long ago that a mortgage loan typically took two to three months. During the past few years, an application can be completed and approved in one or two days with closing occurring within 10 to 14 days.
The advent of automated underwriting systems together with improvements in online application processing, better software systems and cellular technology have streamlined the industry, allowing many loan officers to be more efficient.
"I would not say the industry is working harder, I would say the industry is working smarter," said Joseph Falk, past president of the National Association of Mortgage Brokers and a mortgage broker based in Miami. "This technology has added tremendous efficiency, allowing loan officers to make more loans per day than they were able to do only a few years ago. That's why consumers have been able to take advantage in such tremendous numbers of the low interest rates in the last two to four years."
The process of a mortgage loan application usually starts with a telephone interview to determine a client's goals, financial needs and expectations. The loan officer can then select a proper loan program. Depending on what type of loan is involved, the process also could require documents for an appraisal, land survey, home inspection and other tests.
If an underwriter approves the loan, the application moves to closing.
The loan officer's job is to follow each step, to update everyone involved in the transaction and to ensure the money is available at settlement.
Although there are many types of loan officers, they generally fall into two categories. A mortgage banker is an individual, firm or corporation that originates, sells and/or services mortgages in the secondary mortgage market. A mortgage broker is an individual or firm that originates loans with the intention of brokering them to wholesale lending institutions.
Mortgage brokers, who work with several lenders, say they can be more competitive and offer the most choice in loan programs because they shop for mortgages from various companies. If a homeowner's loan is declined, brokers often will search for another lender.
Mortgage bankers say they originate the loan, process it, underwrite it and fund it. That gives them more control over the process, they say.
Because the loan officer is the borrower's advocate in getting the loan approved and offers advice on various programs, industry experts said consumers should choose wisely.
"The bottom line is you have to talk to someone who knows what they are talking about, " said Neil Sweren, a mortgage broker with Allymac Mortgage Services and past president of the Maryland Association of Mortgage Brokers. "The [loan officer] is going to assist you in determining which program will help you best by asking a lot of questions, You have to use common sense. If you call 10 places and nine are in the same [cost] range but one is really far below, I would question it. There's no magic to this. It's important to work with someone you believe is being honest with you."
In selecting a loan officer, referrals from friends or colleagues can be a good place to start.
But most agree that borrowers should contact at least three loan officers for interviews. Make sure the loan officer is quick to respond to phone calls, answers all questions clearly and is someone you can work with, experts said. A membership in the trade associations and a check with the Better Business Bureau can be other reassurances.
When shopping for a rate quote, make sure the figures are from the same day and for the same amount of points and closing costs. It's important to compare the same product, said Patty McGill, president of Money Marketing Inc. and past president of the National Association of Mortgage Brokers.
"Sometimes, lenders and brokers will tell a caller they are offering a rate with 'no points' when in fact they are charging an origination fee or other fees and just not calling them points," McGill said. "The consumer needs to ask if they are being charged an origination fee, broker fee, discount points or any other fees in addition to those."
Most loan officers are paid a commission based on the percent of the closed loan. This percentage is tiered based on production levels of the loan officer. A typical commission, however, is 0.5 percent of the loan. So on a $100,000 loan, an average commission would be $500. Some loan officers also may receive a flat fee or a fee in addition to a commission for closing a loan.
In 2001, a loan officer earned $50,000 to $177,000 with a median salary of $105,000. The figures are based on an annual compensation survey by Aon Consulting for the Mortgage Bankers Association of America. The large range in salaries is a result of compensations being volume driven, experts said.
The industry has experienced steady growth during the past decade, according to statistics from the U.S. Department of Labor. In 1992, an estimated 180,200 people were employed as mortgage bankers and brokers. The figure rose to 262,700 in 1997, and in 2001 the number increased to 326,900.
Early indications by the Mortgage Bankers Association are that mortgage activity will begin to decline as refinancing wanes in the second half of the year. This could mean a shift in business for loan officers.
"What we are trying to focus on right now is getting back to our traditional line of business, which is really staying in contact with all of your referral sources," Silas said. "During the last year, it has been very easy to sit in the office and wait for leads to come in. Traditionally, we have to go out and get business."
Bob Kaestner, vice president and sales manager with the consumer real estate division of Bank of America and an officer with the Maryland Mortgage Bankers Association, agreed.
"We also have to acknowledge that this volume isn't always going to be at this level," Kaestner said. "If you're a smart mortgage originator, your job is not going to change. There's always business to be done in the marketplace. In our business you have to be extremely efficient with the opportunities we have."
How to choose a mortgage lender
Build a list of lenders. Talk with acquaintances who have bought or refinanced a home recently. Check the newspaper and yellow pages.
Talk with a loan officer. Call or visit the lenders on your list. Get a feel for what it will be like to work with them, and how they approach your needs. Ask for references.
Shop and compare interest rates and closing costs.
Be aware of all fees. Get estimates in writing.
Source: The National Association of Mortgage Brokers and the Mortgage Bankers Association of America.
More tips
When should I talk to a mortgage lender?
When you start thinking about buying a home. You can't apply for a mortgage until you've chosen your home and signed a contract to buy it. But you shouldn't wait until then to start talking with a mortgage lender. Most mortgage lenders will work with you to determine how much house you can afford, help steer you to special mortgages and make suggestions that could make it easier to get the best mortgage.
How do I know which type of mortgage is best for me?
This is based on a variety of factors: your current financial picture; how you expect your finances to change; how long you intend to keep your house; and how comfortable you are with your mortgage payment changing from time to time.
For example, a 15-year fixed-rate mortgage can save thousands of dollars in interest payments over the life of the loan, but monthly payments will be higher. An adjustable-rate mortgage might get you started with a lower monthly payment than a fixed-rate mortgage - but your payments could increase when the interest rate changes.
The best way to find the right answer is to discuss your finances with a mortgage lender.
Source: The Mortgage Bankers Association of America. Other tips are available at www.mbaa.org and www. namb.org.