Mortgage Loan Originators: What Are They And What Do They Do?
When it comes to home loans and real estate transactions, there’s a lot to keep track of. Mortgage loan originators can help you navigate the mortgage application process.
Let’s look at the job of a mortgage loan originator and see how they can help match a borrower to the mortgage they need to buy the home they want.
What Is A Mortgage Loan Originator?
A mortgage loan originator (MLO) guides mortgage applicants and borrowers through the mortgage approval process.That’s everything from preparing the loan application to closing on the home loan. MLOs are licensed by state and national authorities and know about all types of mortgages.
The term “mortgage loan originator” can refer to different entities, including:
- A company that originates mortgages
- An individual who takes you through the process of originating a mortgage loan from application to closing.
Individual mortgage loan originators may work on behalf of a company that originates mortgages, or they may be a mortgage broker who takes your application and works with several companies.
Because an MLO can be an individual or a company, it’s worth understanding their unique roles in helping you get a mortgage.
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Mortgage Loan Originator: The Person
Of all the parties involved in a mortgage, one of the first people you’ll probably talk to will likely be a mortgage loan originator, also known as a loan officer.
In some cases, this person is a mortgage broker. A mortgage broker will take your application and show you optionsfrom several lenders so you can compare prices and servicing policies.
A mortgage loan officer’s job is to guide you through the mortgage approval process. For a refinance, that meanshelping you with the paperwork, collecting documentation and figuring out the loan amount and type that fits your goals.
What Does A Mortgage Loan Originator Do?
You’ll need to complete a few steps while applying for a mortgage, and an MLO will play a role during each one. Let’s take a look at the process and your loan originator’s role during each step.
- Preapproval: In a real estate transaction, you should get mortgage preapproval or Verified Approval before shopping for a home. Preapproval helps you know how much you can afford and shows sellers you’re a serious buyer. An MLO will be your first point of contact and can estimate your loan amount based on your credit, income and assets.
- Underwriting: Whether it’s a purchase or refinance, the next step for your MLO is to take the completedapplication and collect documentation. The documentation will help them get you through underwriting, which confirms that you qualify for a mortgage based on your finances and the type of property you’re buying.
- Closing: Finally, your MLO will work to get your loan to the closing table. At this point, you can reap the benefits of your loan – either a new house or financial benefits from a refinance.
The responsibilities of an MLO may fall to one person or several people, depending on who you work with.
Mortgage Loan Originators: The Lending Institutions
The term “mortgage loan originator” can refer to an individual originating your mortgage loan or an institutionresponsible for funding a loan. In the mortgage industry, loans are made through banks or nonbank lenders.
Some mortgage loans are funded by traditional banks, financial institutions that hold checking and savings accounts, lines of credit and other investments. Meanwhile, nonbank lenders specialize in mortgages.
Does A Mortgage Loan Originator Need A License?
Yes, all mortgage loan originators must have a state or federal license. Let’s look at a few types of requirements for MLOs.
Mortgage Brokers And Loan Officers
Each state has its set of requirements for mortgage loan officers and brokers. To originate mortgages, an individual loan officer must obtain state-level licensing, which can be certifications or licenses. Institutions funding loans must also maintain specific licenses.
While requirements vary by state, all individual MLOs typically undergo a background check and take continuing education courses to keep their license up to date.
Banks And Financial Institutions
Nationwide banks must register with the federal government. Nonbank lenders and local originators must license their MLOs at the state level.
Lenders must comply with the Secure and Fair Enforcement for Mortgage Licensing (SAFE) Act of 2008. The SAFE Act requires MLOs to publish federal and state licenses in the Nationwide Multistate Licensing System (NMLS).
Borrowers can check the licensing and registration details of individual lenders and bank and nonbank MLOs in the NMLS directory.
Mortgage Loan Originators And The Secondary Mortgage Market
No matter which institution initially funds your loan, it’s probably not the end of the line for the loan. Very few banks or lenders keep their originated loans in their portfolios and continue to collect mortgage payments over the life of the loans. Many mortgage loan originators bundle individual loans to sell them on the secondary mortgage market and use the proceeds to fund more mortgages.
Most mortgage loans are backed by one of several major mortgage investors, including Ginnie Mae, Fannie Mae and Freddie Mac. Institutional investors insure and purchase loans that meet their standards. The loans are packaged into mortgage-backed securities and sold on the bond market.
It’s worth noting that a lender can continue to service your loan even after selling it to an investor. The original lender would continue to collect your payments and manage your escrow account.
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Mortgage Loan Originator FAQs
Now that you know what an MLO is and what they do, let’s answer a few common questions about them.
How do I choose a mortgage loan originator?
Shopping around for a home loan to get the right loan product at the best price is as important as shopping for the right mortgage loan originator. Keep in mind that finding the right mortgage goes beyond getting the best interest rate. It’s also about working with a company you trust. When in doubt, ask for a referral from a friend or family member and check online reviews.
What is a typical mortgage loan originator salary?
The answer depends on whether the originator is independent or employed by a lender. Mortgage brokers are independent and work with different loan products across lenders. They’re either paid directly by the client or earn a commission from the lender they work with for each loan.
When an MLO is an employee of an individual lender, they work exclusively with that institution’s product offerings. Pay structures will vary based on the company and its policies. Payment is usually a combination of commission plus an hourly rate or salary. A typical salary is difficult to estimate since commission makes up part of their income.
What is a mortgage origination fee?
The mortgage origination fee is a one-time administrative fee a mortgage lender charges for processing a loan. The fee includes processing the loan application, underwriting the loan and more. The mortgage origination fee typically costs 0.5% – 1% of a home loan and is paid at closing.
The Bottom Line
A mortgage loan originator’s role is to help shepherd your loan from application to underwriting to the closing table. MLOs help you accomplish your homeownership goals.
A mortgage loan originator can refer to an individual or the people in a financial institution handling the loan origination process and the institution funding the loan. MLOs may work for mortgage lenders or are mortgage brokers who can offer loan options from several institutions.
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