For many individuals, taking out a loan may be the only way to afford a house, car, or college education. For businesses, loans likewise are essential to start many companies, purchase inventory, or invest in capital equipment. Loan officers facilitate this lending by finding potential clients and assisting them in applying for loans. Loan officers also gather personal information about clients and businesses to ensure that an informed decision is made regarding the creditworthiness of the borrower and the probability of repayment. Loan officers may provide guidance to prospective loan applicants who have problems qualifying for traditional loans. The guidance may include determining the most appropriate type of loan for a particular customer and explaining specific requirements and restrictions associated with the loan.
Loan officers usually specialize in commercial, consumer, or mortgage loans. Commercial or business loans help companies pay for new equipment or expand operations; consumer loans include home equity, automobile, and personal loans; mortgage loans are made to purchase real estate or to refinance an existing mortgage. As banks and other financial institutions begin to offer new types of loans and a growing variety of financial services, loan officers will have to keep abreast of these new product lines so that they can meet their customers’ needs.
In many instances, loan officers act as salespeople. Commercial loan officers, for example, contact firms to determine their needs for loans. If a firm is seeking new funds, the loan officer will try to persuade the company to obtain the loan from his or her institution. Similarly, mortgage loan officers develop relationships with commercial and residential real estate agencies so that, when an individual or firm buys a property, the real estate agent might recommend contacting a specific loan officer for financing.
Once the initial contact has been made, loan officers guide clients through the process of applying for a loan. The process begins with a formal meeting or telephone call with a prospective client, during which the loan officer obtains basic information about the purpose of the loan and explains the different types of loans and credit terms that are available to the applicant. Loan officers answer questions about the process and sometimes assist clients in filling out the application.
After a client completes the application, the loan officer begins the process of analyzing and verifying the information on the application to determine the client’s creditworthiness. Often, loan officers can quickly access the client’s credit history by computer and obtain a credit “score,” representing a software program’s assessment of the client’s creditworthiness. In cases a credit history is not available or in which unusual financial circumstances are present, the loan officer may request additional financial information from the client or, in the case of commercial loans, copies of the company’s financial statements. With this information, loan officers who specialize in evaluating a client’s creditworthiness—often called loan underwriters—may conduct a financial analysis or other risk assessment. Loan officers include such information and their written comments in a loan file, which is used to analyze whether the prospective loan meets the lending institution’s requirements. Loan officers then decide, in consultation with their managers, whether to grant the loan. If the loan is approved, a repayment schedule is arranged with the client.
A loan may be approved that would otherwise be denied if the customer can provide the lender with appropriate collateral—property pledged as security for the repayment of the loan. For example, when lending money for a college education, a bank may insist that borrowers offer their home as collateral. If the borrowers should ever default on the loan, the home would be seized under court order and sold to raise the necessary money.
Some loan officers, referred to as loan collection officers,
contact borrowers with delinquent loan accounts to help them find
a method of repayment in order to avoid their defaulting on the
loan. If a repayment plan cannot be developed, the loan collection
officer initiates collateral liquidation, in which the lender
seizes the collateral used to secure the loan—a home or car, for
example—and sells it to repay the loan.
Working as a loan officer usually involves considerable travel. For example, commercial and mortgage loan officers frequently work away from their offices and rely on laptop computers, cellular telephones, and pagers to keep in contact with their employers and clients. Mortgage loan officers often work out of their home or car, visiting offices or homes of clients to complete loan applications. Commercial loan officers sometimes travel to other cities to prepare complex loan agreements. Consumer loan officers, however, are likely to spend most of their time in an office.
Most loan officers work a standard 40-hour week, but many work
longer, depending on the number of clients and the demand for
loans. Mortgage loan officers can work especially long hours,
because they are free to take on as many customers as they choose.
Loan officers usually carry a heavy caseload and sometimes cannot
accept new clients until they complete current cases. They are
especially busy when interest rates are low, a condition that
triggers a surge in loan applications.
Loan officer positions generally require a bachelor’s degree in finance, economics, or a related field. Banking, lending, or sales experience is highly valued by employers. Most employers also prefer applicants who are familiar with computers and their applications in banking. Loan officers without college degrees usually advance to their positions from other jobs in an organization after acquiring several years of work experience in various other occupations, such as teller or customer service representative. Personal qualities such as sales ability, good interpersonal and communication skills, and a strong desire to succeed also are important qualities for loan officers.
There are currently no specific licensing requirements for loan officers working in banks or credit unions. Training and licensing requirements for loan officers who work in mortgage banks or brokerages vary by State.
Various banking-related associations and private schools offer courses and programs for students interested in lending, as well as for experienced loan officers who want to keep their skills current. For example, the Bank Administration Institute, an affiliate of the American Banker’s Association, offers the Loan Review Certificate Program for persons who review and approve loans. This program enhances the quality of reviews and improves the early detection of deteriorating loans, thereby contributing to the safety and soundness of the loan portfolio. The Certified Mortgage Banker (CMB) designation demonstrates the holder’s superior knowledge, understanding, and competency in real estate finance. The Mortgage Banking Association offers three CMB designations: residential, commerce, and master’s. To obtain the CMB, the candidate must have 3 years of experience, earn educational credits, and pass an exam. Completion of these courses and programs generally enhances one’s employment and advancement opportunities.
Persons planning a career as a loan officer should be capable of developing effective working relationships with others, confident in their abilities, and highly motivated. For public relations purposes, loan officers must be willing to attend community events as representatives of their employer.
Capable loan officers may advance to larger branches of the firm
or to managerial positions, while less capable workers—and those
having weak academic preparation—could be assigned to smaller
branches and might find promotion difficult without obtaining
training to upgrade their skills. Advancement beyond a loan officer
position usually includes supervising other loan officers and
Loan officers held about 291,000 jobs in 2004. About 9 out of
10 loan officers were employed by commercial banks, savings institutions,
credit unions, and related financial institutions. Loan officers
are employed throughout the Nation, but most work in urban and
suburban areas. At some banks, particularly in rural areas, the
branch or assistant manager often handles the loan application
Employment of loan officers is projected to increase more slowly than average for all occupations through 2014. College graduates and those with banking, lending, or sales experience should have the best job prospects. Employment growth stemming from economic expansion and population increases—factors that generate demand for loans—will be partially offset by increased automation that speeds lending processes and by the growing use of the Internet to apply for and obtain loans. Job opportunities for loan officers are influenced by the volume of applications, which is determined largely interest rates and by the overall level of economic activity. However, besides openings arising from growth, additional job openings will result from the need to replace workers who retire or otherwise leave the occupation permanently.
The use of credit scoring has made the loan evaluation process much simpler than in the past and even unnecessary in some cases. Credit scoring allows loan officers—particularly loan underwriters—to evaluate many more loans in much less time, thus increasing the loan officer’s efficiency. In addition, the mortgage application process has become highly automated and standardized, a simplification that has enabled online mortgage loan vendors to offer their services over the Internet. Online vendors accept loan applications from customers over the Internet and determine which lenders have the best interest rates for particular loans. With this knowledge, customers can go directly to the lending institution, thereby bypassing mortgage loan brokers. Shopping for loans on the Internet is expected to become more common in the future, especially for mortgages, thereby reducing demand for loan officers.
Although loans remain a major source of revenue for banks, demand
for new loans fluctuates and affects the income and employment
opportunities of loan officers. An upswing in the economy or a
decline in interest rates often results in a surge in real estate
buying and mortgage refinancing, requiring loan officers to work
long hours processing applications and inducing lenders to hire
additional loan officers, who often are paid by commission on
the value of the loans they place. When the real estate market
slows, loan officers often suffer a decline in earnings and may
even be subject to layoffs. The same applies to commercial loan
officers, whose workloads increase during good economic times
as companies seek to invest more in their businesses. In difficult
economic conditions, an increase in the number of delinquent loans
results in more demand for loan collection officers.
Median annual earnings of loan officers were $48,830 in May 2004. The middle 50 percent earned between $35,360 and $69,160. The lowest 10 percent earned less than $27,580 while the top 10 percent earned more than $98,280. Median annual earnings in the industries employing the largest numbers of loan officers in 2004 were as follows:
The form of compensation for loan officers varies. Most are paid a commission that is based on the number of loans they originate. In this way, commissions are used to motivate loan officers to bring in more loans. Some institutions pay only salaries, while others pay their loan officers a salary plus a commission or bonus based on the number of loans originated. Banks and other lenders sometimes offer their loan officers free checking privileges and somewhat lower interest rates on personal loans.
According to a salary survey conducted by Robert Half International,
a staffing services firm specializing in accounting and finance,
mortgage loan officers earned between $30,000 and $100,000 in
2005, consumer loan officers with 1 to 3 years of experience earned
between $30,000 and $35,000, and commercial loan officers with
1 to 3 years of experience made between $45,500 and $70,000. Commercial
loan officers with more than 3 years of experience made between
$61,750 and $100,000, and consumer loan officers earned between
$25,500 and $50,000. Earnings of loan officers with graduate degrees
or professional certifications are higher. Loan officers who are
paid on a commission basis usually earn more than those on salary
only, and those who work for smaller banks generally earn less
than those employed by larger institutions.
Loan officers help people manage financial assets and secure
loans. Occupations that involve similar functions include those
of securities, commodities, and financial services sales agents;
financial analysts and personal financial advisors; real estate
brokers and sales agents; insurance underwriters; insurance sales
agents; and loan counselors. See the Career
Database for more information on these careers.
Information about a career as a mortgage loan officer can be obtained from:
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