What Is a Mortgage Loan Originators Function?
A mortgage loan originator is someone who works with potential borrowers hoping to take out a mortgage for the purchase of property. These individuals are usually employed by banks and lending institutions, but some work independently. Loan originators must maintain a license per federal and state laws and must follow strict guidelines in the lending and decision-making processes. While different companies assign varying tasks to loan originators, their basic job is to meet with clients, review financial documents and make a decision as to whether the applicants are fit to borrow money.
As the name suggests, mortgage loan originators help to create original mortgage transactions between lending institutions and potential borrowers. Each potential borrower presents a risk to the lender in terms of the likelihood that the borrower will repay the debt. The mortgage loan originator, also known as a mortgage broker or mortgage banker, is responsible for reviewing the entire financial background of the borrowers to determine whether they make good candidates to borrow money. This involves running a credit report, determining the applicant's debt-to-income ratio, communicating with the lending institution as to the borrower's creditworthiness and determining an appropriate interest rate and loan terms. This position encompasses the roles of loan broker and underwriter and encapsulates these duties into one job description.
Role in the Lending Process
The loan originator plays a vital role in the loan origination process and often makes the crucial decision over whether to approve the application and begin financing. This is a highly responsible position in that the originator is tasked with doing the research about all applicants and protecting the lender from making bad investments in borrowers not likely to repay the loan. Mortgage loan originators must take the time to review all delinquencies or defaults and determine whether these mistakes are going to affect the lending decision.
Licensing and Regulations
The lending industry is highly regulated by federal and state laws. Mortgage loan originators must obtain a license through their state regulatory agency and follow rules and guidelines to maintain that license. For instance, mortgage loan originators must abide by the Truth in Lending Act, which prohibits discriminatory lending practices. Also, mortgage loan originators must make certain that borrowers are fully educated and informed about their choices when entering into high-risk adjustable-rate mortgages or those with balloon payments.
Job Outlook and Pay
The U.S. Bureau of Labor Statistics refers to mortgage loan originators as loan officers and reports an expected growth of 14 percent from 2010-2020. This type of position is heavily dependent upon the economic climate and tends to increase in times of population growth, low interest rates and economic prosperity. The median annual wage of loan officers in the U.S. is around $56,500.
Stephanie Reid has been writing professionally since 2007, with work published in the Virginia Bar Association's "Family Law Quarterly" and the "Whittier Journal of Child and Family Advocacy." She received her Juris Doctor from Regent University and her Bachelor of Arts in French and child development from Florida State University. Reid is admitted to practice law in Delaware and Maryland.