Wet behind the ears loan officers...

The requirement to become a mortgage loan officer is often very limited. If the loan officer goes to work for a bank, they usually just show up for work. The bank goes through a quick training of "this is how we do this here" and voila' they are now loan officers ready to give you advice on which program is best for you. No state-issued license or finger prints. When a mortgage broker hires a loan officer, they are normally required to have a real estate license. To acquire a real estate license you must pass an exam and be finger printed. If you have a felony, it's almost impossible to talk the Department of Real Estate into giving you a license.

Over the past 7+ years, the mortgage industry had been in an unusual and not likely to occur again gold rush. Rates began to fall in 2001 and had been on a steady decline since our "correction" which began around 2006. Rates are still under 7.00% and consumer advocates would scream bloody murder if rates shot up into the 8.00% range where they hovered in the mid-90s.

Most mortgage loan officers profited from both home sales and the mad refinance frenzy. All a loan officer typically had to do was open his window for a couple of minutes to let new loan applications fly in. Then close the window when he got too busy. The result was an influx of new, wet-behind-the-ears Loan Officers. Still no problem there, everybody starts somewhere right? The problem is that Loan Officers who have only been in the business for a couple of years may have never truly learned how loans are approved, declined or saved from certain disaster.

Automated Underwriting Systems (AUS) have replaced "loan-savvy." Instead of a loan applicant providing information to a Loan Officer to help determine the type and size of loan they can qualify for, the Loan Officer instead inputs the information into the AUS, waits a few seconds, then "Ding!," Loan Approval, often without the Loan Officer knowing why, or "why not" in the case of not receiving a loan approval.

With the changing of the interest rates, causing a reduction of refinances, and the real estate market in turmoil, many of our local brokers have had to shut their doors. In my opinion, this trend will continue over the next 3 to 6 months. Recently, I've noticed an increase of newer, younger loan officers looking for a broker to work under. During the interview process, our discussions over their previous experiences and training are somewhat amusing.

I heard comments about how "they" were getting loan approvals for borrowers with abnormally high debt ratios, as well as closing files where the buyer had lousy credit, low incomes and no money down for their purchase. Then with pride they'd tell me how much commission they were able to make on the transaction. And so on. The fact is that these Loan Officers didn't have anything to do with the approval process or understand the ramifications of placing borrowers in loans that will not do well for them in the future.

I rarely hire these types of loan officers. They're usually difficult to re-train and are only interested in the fast buck this industry can offer. Once they've crossed the "greed" line, there's usually no turning back.