Organizations are often unable to attract top-performing loan officers on a regular basis. In the current competitive capital market, almost everyone offers good compensation.
But a better financial offer misses out on recognizing a key factor. That is, faster operations make LOs work faster, easier and more beneficial.
This blog will cover how and why fast underwriting and efficient operation help an organization recruit LOs more efficiently.
Why Speed Matters for Loan Officer Recruitment?
Loan officers’ income comes from the loans they are able to approve. Payment structure varies from organization to organization.
To understand why speed matters to loan officer recruitment, especially high-performing LOs (Rainmakers), you need to first understand how loans influence their life.
2 Ways How A Loan Officer Typically Makes Money
1. Salary and benefits
If a loan officer is working for a financial institution like a bank, they will receive a fixed salary and other benefits. These benefits are basically commissions from finalizing any loan or by meeting the target given by the institution.
In the banking sector, to increase LO’s productivity rate, management often increases the base points (BPS). But eventually, the benefits a LO receives massively depend on the turn-rate of loans.
If the turn rate is fine and the operation does well with underwriting, then the LOs can gain a healthy benefit.
2. Commission-based earnings
Except for financial institutions, state-licensed mortgage brokerages often provide LOs/MLOs only commissions from the loans they approve. In these types of scenarios, BPS ranges are typically high.
But a loan officer has to rely on the operation (ops) for this. They only procure the commission when the loan is approved. Thus, the loan cycle time is important for them. And a faster turn-rate means they can approve more loans and earn more.
Motivational Factors of LOs for a Fast-Faced Operation
For any profession, money is the biggest motivator.
Similarly, the process that highly affects one’s income intensity will be equally important for them too. As faster operations enable LOs to sell more loans and acquire more benefits, they become one of the major factors that LOs look for in a business.
In the Capital market, time is crucial and a Loan officer is deeply affected by this.
That’s why a Rainmaker or top LO will always prefer a working environment where the Fallout rate is low and they can deliver a loan faster and earn more money.
Eventually, speed becomes a key influential factor for headhunting, recruiting or retaining LOs or MLOs.
How Does Fast Underwriting Help Recruit Top LOs?
Underwriting is the process of reviewing a loan file to determine if it meets approval and risk guidelines.
In the lending business, as the product is the loan itself, everything that drives faster loan processing influences the overall business performance. This involves recurring top-level LO/ MLOs who eventually sell the loans to borrowers.
A top-performing LO or Rainmaker avoids working at an institution where the closing timeline for loans is way longer. To understand how faster underwriting motivates and attracts LOs, we first need to understand how underwriting works.
How Underwriting Works?
Underwriting is a complicated process that structurally varies with the type of industry, business or individuals.
If generalized, three key components are involved in underwriting.
3 Stages of the Underwriting Process
1. Screening
Before a loan reaches the underwriter, a loan officer checks the borrower’s credit score and income. This makes sure that the application is solid and contains all the necessary documents for a final decision.
2. Underwriting
The underwriter goes through a detailed risk assessment, evaluating the business’s value and repayment capacity to determine whether to approve or reject the loan. This process depends on the type of loans.
For example, for a consumer loan, the DTI (debt-to-income) ratio plays a significant part.
If it’s for a business, then the underwriting includes financial statements, business plan, business stability, DSCR (debt coverage), and regulatory compliance types of items.
3. Approval or denial
Following the risk report from the underwriter, the lender issues a decision:
- Approval and sometimes setting up some terms
- Suspension and pending for more information
- Denial if the risk is too high
How Fast Underwriting Process Attracts Top LOs And MLOs?
The three mentioned stages are not as simple as described. The key to getting a better outcome for a financial institution is to make the fallout rate low and processing fast.
But different factors affect the throughput rate (loan processing capacity). For example, if your operation has a lower capacity to process applications, it means you will receive less throughput.
Massive applications waiting in the pipeline often create chaos if the ops can’t handle the tasks. Eventually, all these lead to a lower approval rate. Which means the LOs will likely obtain fewer commissions as well.
That’s why loan officers tend to be attracted to institutions that can process a large number of loans in an adequate timeframe. This also affects the recruitment process and with faster underwriting, it is likely to acquire the best LOs and MLOs.
How Strong Operations Teams Improve LOs Retention and Attraction?
Having a strong operations team means the loans are approved faster, LOs can secure more commissions and the business obtains a better output.
As discussed earlier, money is the primary motivational factor for a person. And faster operation means a better opportunity to earn more.
Same thing goes for strong operations too, because it enables an LO to perform at his best.
To understand it more deeply, we need to evaluate the benefits of a strong operation.
- Operations handle documentation which reduces LOs workload
- Proactive ops teams can catch issues early to avoid last-minute Fire drills
- Consistent processes allow LOs to meet the predictable closing dates
- Smooth operations mean better borrower experience
- Reliable closings strengthen trust and help get referrals
- Operational efficiency reduces frustration and helps to keep burnout lower
- Scalable systems allow LOs to grow their pipeline without dropping quality
- Clean processes eliminate document corrections and reduce rework
This makes it clear that a strong operation makes an LO’s work easier, effective and financially beneficial.
But the U.S. capital market is incredibly competitive; its real challenge lies in its complexity which often affects the operation team.
Since the 2008 financial crisis, the lending scenario has tightened significantly. Much of this is due to the Dodd-Frank Act, which introduced a massive number of new regulations and red tape.
For businesses today, this means navigating a maze of sophisticated operational and compliance structures just to prove they are a safe bet for funding.
Thus, a strong ops team means staying ahead in the market not just in terms of retaining best talents but also providing better service.
Competitive Recruiting Messaging Built Around Speed
In the current market, Loan Officers aren’t just attracted by higher BPS, company culture or salary.
Underwriting speed and operational efficiency are key aspects that LOs are keen about. For a loan officer, lending a loan isn’t all about just enabling a person to borrow some money and take benefits out of it.
A top-level MLO or LO maintains certain standards for themselves as well to sustain a long-lasting career as well.
A speedy operation team provides the LOs proper idea about the loan closing timeline. This is essential because the borrower’s satisfaction heavily depends on it. Which then affects LO’s reputation and commissions.
Loan cycle time is important because it ensures that the borrower receives the money within their required time. If a business fails to underwrite in an adequate time, it hampers its reputation too. Then it makes LOs job harder to obtain clients.
That means, a speedy operation is behind better turnout, better results, a good working environment and financial benefits for a loan officer. And collectively, all these send a message to all the candidates that it’s a good job opportunity.
Conclusion
In the competitive lending market, speed has become a major deciding factor for Loan Officers to desire a workplace. Fast underwriting and efficient operations allow LOs to close more loans, earn more commissions and protect their reputation.
Organizations that deliver consistent turn times naturally attract and retain top-performing LOs.
In short, operational speed is no longer just an internal advantage; it’s a powerful recruiting tool.
FAQs
Why Do LOs Care About Underwriting Speed?
Underwriting speed determines how long the loan cycle is going to take. This also means how much they will earn, whether they will be able to maintain their reputation or not and so many other things. That’s why LOs care a lot about underwriting.
Does Fast Operations Improve LOs Production?
Yes. Fast operations help improve LOs’ production because loan officers are able to work on a suitable environment and expand their spectrum.
What Operational Metrics Attract Loan Officers?
Underwriting turn time, loan cycle time, fallout rate, CTC rate and more.
How Can Lenders Recruit More LOs With Faster Processes?
Faster ops processing means a better opportunity of income and performance. It attracts more LOs.
