How to choose a Loan Officer? Whether you are a Borrower, Real Estate Agent, or Financial Professional, it is only a matter of time before you are tasked with the decision of how to choose a Loan Officer.
Note: click here for Part 1 of How to choose a Loan Officer
In this 2 part article, a detailed yet objective analysis will uncover the facts to enable you to make the best selection for your personal (or referral) needs. The first step is to understand the differences between the top 3 types of "Mortgage Company Platforms" which are summarized below.
(It bears noting that the Author of this 2 part article has personally worked in each of the 2 Mortgage Originator Types, which allows a "first person" account of the pros & cons of each)
In Part 1 of How to choose a Loan Officer, the 3 different Lender Platform Options were identified, compared, and contrasted to allow a better understanding of the pros & cons associated with each of these options. In this chapter of How to choose a Loan Officer, the topics of corporate culture, marketing strategies, and customer service philosophies are discussed.
The chart above describes the 2 basic philosophies of how a Mortgage Company attracts new business (i.e. how they make their phones ring). The 2 types of Mortgage Company's thus, are as follows:
Transactional Mortgage Company (i.e. Call Centers)
These types of Mortgage Company's launch advertising campaigns designed to capture the attention of prospective clients. The most common forms of media used by Transactional Mortgage Company's are radio & television advertisements, direct mail letters & postcards, Internet pop-up banners, and freeway billboard signs.
From an economic perspective, these Transactional Mortgage Company's "pay to make their phones ring" by analyzing consumer response tendencies to different forms of media. Among the data analyzed is the following:
- Overall cost of the advertising campaign divided by the number of leads generated = total cost per lead
- Amount of leads necessary to convert to a loan application
- Number of loan applications necessary to successfully fund a loan
- Average revenue generated per loan
- Ultimately, the cost of a funded loan is computed
Salespeople vs Loan Officers - Although there is nothing wrong with this capitalistic marketing philosophy, the tendency of these Transactional Mortgage Company's is to hire professional salespeople with a proven track record of "closing" a large percentage of inbound phone calls in order to successfully "cover" the outlay of marketing dollars spent each month. One of the main causes of the housing crash in the mid-late 2000's was the fact that so many mortgage loans were originated by "salespeople" instead of "Loan Officers" (and yes, there is a big difference).
Economic Logic - Imagine if you owned a Transactional Mortgage Company and spent tens of thousands of dollars each month on marketing expenses. Wouldn't you hire professional salespeople too? Although this method is widely used within the mortgage industry, it bears noting that Consumers have a choice on who to work with.
Types of Mortgage Loans - Typically, a Transactional Mortgage Company will focus on "refinance" mortgage loans rather than "purchase" mortgage loans. The fact of the matter is "purchase" loans are more complex and involve more pressure to meet specific timelines, while working with Real Estate Agents, Home Sellers, and different Title/Escrow Companies. In contrast, "refinances" represent the lower-hanging-fruit, which increases the likelihood of closing more units in any given month.
Professional Accountability - Since Transactional Mortgage Company's typically generate a large number of leads, the fact of the matter is that if the Salesperson fails to do a good job with any given Caller, the phone will still ring again with a new Caller later that day. This mere distinction often leads to a reduced level of personal & professional accountability displayed by the Salesperson. It bears noting that there are many great professionals working for Transactional Mortgage Company's. That said, if an "accountability-challenged" Salesperson wishes to work in the Mortgage Industry, they are forced to work in a Transactional Mortgage Company. Read the description below for a Relational Mortgage Company to see why.
Relational Mortgage Company (i.e. Referral-Based)
These types of Mortgage Professionals are solely reliant on referral and repeat business by taking the role of a Trusted Advisor to their valued Clients and Referral Sources (i.e Real Estate Agents, Financial Professionals, Legal Advisors, etc.).
Credentialed & Licensed Professionals - In order to maintain the level of competency and trust necessary to base your entire business plan on referrals, a Loan Officer working for a Relational Mortgage Company will typically pursue additional credentials aimed at providing a higher level of service to their Clients and referral sources. Among these credentials are:
- Certified Mortgage Planning Specialist (CMPS) - click here to learn more about the additional credentials and training earned by a CMPS, and click here to find a CMPS in your area.
- Certified Distressed Property Expert (CDPE) - click here to learn more about the additional credentials and training earned by a CDPE, and click here to find a CDPE in your area (make sure to specify that you are looking for a Mortgage Professional, otherwise you will be referred to a Real Estate Agent within this site).
- California Department Of Real Estate (DRE) - To quickly determine if your Loan Officer has a California DRE License, click here (this link will also let you know if your Loan Officer has any violations and/or suspensions of their license).
- Nationwide Mortgage Licensing System (NMLS) - To quickly determine if your Loan Officer has an NMLS License, click here. It bears noting that all NMLS Licensees must list thier NMLS License Number on all of their outbound marketing materials (including business cards, email signature lines, fliers, etc.). That said, it is very easy to identify which Loan Officers are NMLS Licensed, and which ones are not.
Types of Mortgage Loans - Typically a Loan Officer working for a Relational Mortgage Company will focus on both Purchase and Refinance mortgage loans. The fact of the matter is that the "longer term plan" for career-minded mortgage professionals is to develop long-lasting relationships.
Professional Accountability - The fact of the matter is that a Loan Officer working for a Relational Mortgage Company really can not afford to have any bad days. As silly as that may sound, the only successful approach to this professional philosophy is to be 110% accountable to all parties at all times. Relational Mortgage Company's are reputation-based, and we all know how quickly "bad press" can spread when the job is not performed at optimal levels.
How to choose a Loan Officer: Summary
A strong visual aid to the above-referenced points is listed below:
When determining how to choose a Loan Officer, ask yourself who you would like to trust with your most significant financial transaction. Whether this decision is for yourself personally, or for someone you care about (i.e. friends, family, neighbors, co-workers, etc.), encourage them to read this article (along with Part 1 of How to choose a Loan Officer).
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