Primary marketLongevity is Key When Choosing Your Loan Officer
The mortgage business is a nice business to be in. We, as loan officers, find personal satisfaction when we help people get money to buy a home. My daughter is awfully proud of the fact that her daddy “gives money to people to buy a house.” While I don’t do exactly that, it is true that loan officers can experience the well being of helping a scared first time homebuyer. Or to help a credit-challenged client to overcome obstacles and put them in their very own home. I will never forget the eyes of a young lady whose tears welled up in her eyes as I told her “congratulations, you’re approved.”
Besides all that, there is another benefit to being in the mortgage business. In good economic times, people go out and buy homes. Those people typically need a mortgage. In bad economic times, rates fall and people refinance those same loans. While there are certainly cyclical elements to mortgage banking, the industry itself can be less impacted by economic swings than others. And loan officers typically get paid the same whether a loan is a purchase or if it’s a refinance. But it’s at this point where the rubber meets the road.
As interest rates begin to creep up and refinance applications dwindle, mortgage loan officers will be overwhelmed by the deafening roar of silence. Except of course the mortgage loan officers who don’t depend upon refinance mortgage loans to put food on their table. Mortgage loan officers can make some pretty good pocket change during a refinance boom. Knowing that, loan officer ranks will swell with people new in the business to take advantage of that opportunity. Or swell with those who are “part timers” that only do loans during refinance cycles. When the refinance period ends, suddenly there’s no more money to be made. Then what?
Loan officers who’ve been in the business in between cycles get their business from various sources. Some loan officers rely on certain real estate agents to refer borrowers. Some loan officers work with builders. Some with CPAs and Financial Planners. The point is that veteran loan officers make money regardless of what rates do. And they’re in the business because they like it. Not just to make a “quick buck.” Is it a bad thing to be in the business just to make a “quick buck?” Of course not. America was built on making money. But what does this have to do with you?
Let’s say that you’re in the market for a house and you expect to close on something within the next 90-120 days. Let’s also assume you’re working with a loan officer who is either relatively new in the business or doesn’t have a solid base of business other than refinance applications. You might very well be one of the few loans in his or her pipeline. You might be the only one. Big deal, right? Maybe. Let’s say you’re about 20 days away from your closing and you call your loan officer for a rate lock. But your loan officer no longer works there. Not only that, the loan officer is nowhere to be found. Worst case? Your mortgage company closes down due to lack of business.
I’m going to get email from various loan officers from around the country on this one but let me tell you, I’ve seen it all before. When interest rates drop it’s easy for a mortgage company to view themselves as a fairly smart business operation. After all, lots of money in the bank so they must be smart business-folk, right? Some of my old loan officers from the past can already hear me saying “you’re not smart because rates are low, you’re lucky.”
Loan officers who have a good book of business in addition to any “gravy” to be had during a refinance cycle are more experienced, talented and dedicated to their business. Those are traits you need to find in your next loan officer. A refinance, while still a mortgage, is not a “purchase money” mortgage. There are indeed differences between the two and if your loan officer hasn’t done a purchase maybe once or twice, you’re short-changing yourself. As a consumer, it’s your job to try and find the best loan officer available.
So any loan officer who’s only been in the business for two or three years isn’t any good? Again, that’s silly. There are some excellent people who have only been in the business for a short period. As with any industry. But the next time you’re interviewing loan officers, keep in mind not just how long they’ve been in the business, but how long they intend to stay there.