What Is a Mortgage Loan Originator?
When it comes time to buy or refinance a piece of real estate, there’s likely a Mortgage Loan Originator involved. Now, the term “Mortgage Loan Originator” (MLO) typically refers to the person or party who is originating a mortgage loan — which can be a “Mortgage Broker”, a person who works with multiple lending institutions to achieve the best interest rate; a “Mortgage Loan Officer”, the person who works on behalf of a single bank; or the financial institution that’s issuing the loan.
Mortgage Loan Originator Responsibilities
The Mortgage Loan Originator plays a critical role in the overall homebuying process. From the initial loan application to closing on the property, the Mortgage Loan Originator is responsible for helping both the lender and the borrower take the necessary steps to achieve the goal at hand, which includes:
- Evaluating the creditworthiness of the borrower
- Staying up to date with the latest financial trends, products, and rates
- Collecting financial information (e.g., taxes, proof of income, etc.)
- Ensuring the completion of loan documents
- Communicating progress or roadblocks with the borrower
- Networking with other mortgage and real estate professionals
- Fostering a relationship with both the borrower and lender
What Information Do MLOs Need to Process an Application?
Like a real estate agent, the Mortgage Loan Originator’s foremost goal is to help their clients achieve their dream of homeownership. It’s this drive plus a little entrepreneurial spirit that helps fuel the careers of many MLOs. After all, the role of the Mortgage Loan Originator is to guide clients through the entire mortgage process.
For most first-time homebuyers, this will be their first time applying for a loan. Others potential borrowers may have applied for loans before, and some might even be refinancing their current mortgage. Regardless, the general process for securing a home loan tends to be very similar.
The origination process begins when the MLO collects all of the necessary documents and financial information from the applicant, including:
- A photo ID and a Social Security number
- Pay stubs proving income from the last 30 days
- The property information
- Information on outstanding debts like vehicle loans, student loans, or any other debts
- Proof of any other sources of income (e.g., 1099 form)
- Their federal tax returns
- All W-2s or I-9s from the past two years
- A recent bank statement or statement of accounts
- Credit report/credit score from the underwriter
After that information is obtained and the underwriting/loan processing has been completed, the MLO will be able to determine how much money the applicant’s preapproval will be. If they’re not approved, the MLO can dig in and discover what’s keeping them from securing preapproval, such as offering a down payment that’s too small. Lastly, the MLO will ensure the completeness of the mortgage application, answer any questions about loan terms, and make all the necessary documentation available to any party that requires it for a smooth close.
Do Mortgage Loan Originators Need to Be Licensed?
Absolutely! Given that MLOs guide their clients through the homebuying process and issuing a residential mortgage loan can directly affect lives, it comes as no surprise that such responsibility requires a state-issued license.
With that said, each state has slightly different requirements for mortgage licensure, but all are held to standards set by the SAFE Act of 2008 (sometimes called the Mortgage Licensing Act). For example, all prospective MLOs must register with the Nationwide Mortgage Licensing System (NMLS) so that borrowers around the U.S. can have confidence in their mortgage professionals regardless of where they live. Generally speaking, most state-issued mortgage licenses will require that applicants:
- Have a high school diploma or equivalent GED
- Be able to pass a background check
- Complete and pass 20 hours of Pre-Licensing education (or more, depending on the state)
- Pass the state exam
- Secure a surety bond per the state’s requirements
Once the Loan Originator License is obtained, license-holders are required to renew them every year by completing at least 8 hours of Continuing Education. It should also be noted that we’ve described the general minimum requirements here. Many mortgage companies, banks, or credit unions have their own unique expectations of their Loan Originators. And though it's not required, possessing some personal finance or customer service know-how can help MLOs blossom in their career.
How Are Mortgage Loan Originators Paid?
In many cases, Mortgage Loan Originators earn a base salary and make commissions of 1.00% to 2.75% of the loan amount — meaning this career offers the perfect blend of stable income and limitless earning potential. Now, the commission is usually paid by the lender, but loan processing fees can also be paid by the borrower on the front end.
Of course, fee structures and salaries are unique to each employer. According to the Bureau of Labor Statistics, the average MLO makes roughly $63,960 per year, but it’s not unheard of for MLOs to earn much more, sometimes in the seven-figure range.
How Do Clients Choose a Mortgage Loan Originator?
Potential borrowers often shop around to find their MLO. As such, it’s important to implement a marketing plan to succeed in the mortgage industry. Having a sound web presence may be enough, but some ambitious individuals, financial entities, and firms also take out ads to help tee up potential borrowers for their MLOs to hit out of the park.
Establishing an extensive and diverse professional network is a must, too. From real estate agents to family members and friends, there’s a potential referral everywhere.