Training Loan Officers Amid a Regulatory Tsunami

by 17 May 2012

(TheNicheReport) -- You won’t find many people who will argue that a loan officer’s training should stop the minute he or she gets licensed. In reality, that’s when the real education begins. But this on-the-job training has become more challenging given the amount of new and pending regulations confronting our industry. When it comes to showing the ropes to new recruits, are we really doing enough?


To ask loan officers to figure out every regulatory issue on their own—whether it involves loan compensation rules, changes to disclosure forms, HARP or anything else—is asking too much. The simple fact is we’re doing loan officers and the future of our industry a disservice by not putting more effort into training, especially when the best minds in the business are having trouble figuring out the new rules themselves. In my opinion, the responsibility of giving loan officers a practical framework for understanding what to do, how to do it and why begins with leadership.  


Give them the ‘why’


My company conducts a weekly company-wide phone call in which new initiatives or changes in procedures are addressed that relate to compliance. The real message behind this information is not “what,” but why.  In a rapidly changing business environment, it is essential that everyone—and especially new recruits—understands the reason behind the changes in our business. When we all understand, we are all more likely to “buy in” to the change in practice.


This same strategy is useful when working with consumers. We’ve all faced frustrated borrowers in my line of work, folks who cannot understand why they are being asked to jump through extra hoops in order to buy the condo they just fell in love with. But when I explain the impact that a risky or incomplete mortgage can have on others, such as the condominium association, the angry borrower begins to calm down.


Whether it involves loan officer compensation, Dodd-Frank, RESPA or new GFE/TILA and HUD-1 disclosures, teaching loan officers the “whys” behind these changes is a big responsibility. I always wanted to understand compliance issues. I’ve had colleagues that would say, “To heck with that, I’m just doing sales.” But I wanted to know.


So I read – a lot. I spend at least two hours a day absorbing as much as I can about my industry. Frankly, I would rather do this myself so my sellers can concentrate on selling. By learning what I can and slowly passing on only the most relevant “chunks” of information, I am   able to take a lot of worry off the shoulders of my team.


For example, recently enacted loan officer compensation rules were a very long, drawn out and difficult issue for lenders to get their heads around. From January to April, I read and spoke to everyone I could on this subject, but only passed on the most relevant and important material to my team, which made it easier to digest. It also had another benefit. When one of my loan officers had questions about a particular regulation, I could convey the “why” behind it.


Reconciling contradictory info


It would be great if our industry got to the point where everyone had a two-year degree in mortgage finance. As it stands, loan officers in my state take a 20-hour pre-licensing class that certainly teaches them an awful lot about rules and regulations. But part of learning how to be a loan officer is in the “doing.” It’s simply impossible to put into context all the information we learn in class until we are actually working our business and seeing the examples unfold before our eyes.


Of course, with so much happening in our industry, continuing education courses are more important than ever. But suppose someone attends a class and comes back with information that conflicts with what we are trying to do. What happens then? Complicating matters is the fact that there are usually dozens of possible approaches to different regulation—and just as many gray areas, too.


For example, when it comes to self-employed borrowers, certain deductions are allowed to be added back in to increase the borrower’s net income.  However, there is a variety of interpretations regarding what is allowable.  Some will tell you that mileage can be added back in, and in fact, several of my loan officers were told this at a training they recently attended.  Upon confirming this information with our underwriters, it was determined this in fact was not acceptable to most banks.


On-the-job training, in practice


The issue of training and education is made more complex by one of the biggest challenges our industry faces today: How do we bring young people into the industry? It’s no secret that many of us are “aging out” of the business, as the average mortgage professional is in his or her 50’s.


It might behoove us all to train loan officers much like stock brokerage houses of yore used to. It wasn’t unusual for a new college grad to join Morgan Stanley and spend eight weeks in the classroom before he or she was even given a desk and a pencil. But in our business, the real education starts when loan officers begin writing mortgage applications.


This is why mentoring becomes such a crucial piece of the loan officer’s training. It takes a long time to get comfortable in the sales process. And with so much emphasis up front on regulatory compliance, loan officers are often afraid to do something as simple as picking up the phone. Mentors, however, help ease the new loan officer into the process. At my office, I will pay for a loan officer to have an assistant if the loan officer can turn the assistant into a loan officer in a year’s time. This way, I have experienced loan officers helping new people cut their teeth and learning by example.


Another decision I have made is to not allow loan officers to work out of their homes. Of course, under certain circumstances they can work at home for a day—just not all of the time. Back in the day, many mortgage shops encouraged an at-home workforce because it lowered their overhead. Yet when my loan officers are at home, I lose touch with them. In order to lead by example, they need to see my example in practice, every day.


It sounds silly to me, but some companies do not have sales meetings – but a sales meeting is a perfect opportunity to talk about compliance and to allow your team to share strategy. By the same token, participating on the educational board of your local mortgage association is equally valuable, as well as working with real estate professionals to help them understand why the process has changed so dramatically.


Another educational resource that is largely—and perhaps, oddly—untapped is the regulatory agencies themselves. There is nothing stopping us from picking up the phone and calling regulators when we have questions about a recent rule or pending regulation. Even if you still don’t get the answer you want or need, at the very least it shows those who are responsible for enforcing rules that you care.


Some good news


The complexity of new regulations is a huge issue. It is extremely difficult for lenders and branches to figure out what to do. However, because there has been so much contraction in the industry, the lenders that are still in business are far more willing to share advice with each other. There’s a general sense that there is enough market for everybody.


Technology is also proving to be a very good aid for educating and training loan officers. My company frequently utilizes online educational programs offered by our investors as well as those operated by mortgage insurance, title companies and other educational organizations that provide online courses.


When it comes to ensuring regulatory compliance in the actual mortgage process, we put rules into our origination software so that the loans don’t get processed unless they meet certain criteria. While this in itself does not seem like an effort to educate the loan officer, the loan officer is still responsible for knowing why a transaction was halted and faces explaining the problem to the particular borrower.


 Five years after the beginning of the mortgage meltdown, I’m encouraged by the growing emphasis on compliance. At last year’s Massachusetts Mortgage Bankers Association conference, we had a panel on how to lead a compliant, thriving sales culture. Personally, I found it compelling that the word “compliant” was on the front end of that idea.


In this environment, we should all be concerned whether loan officers are receiving adequate training. While every loan officer has a unique identifier on every loan application, in the end, it is usually the loan officer’s company that faces the music when errors occur. For this reason, it is especially incumbent upon those of us who are in positions of leadership to explain the “new rules” to current and incoming loan officers – they are the ones who most need to know.



Amy Tierce is a regional vice president for Fairway Independent Mortgage.  She is based in Needham, Massachusetts, where she oversees the New England market. A former board member  of the Massachusetts Mortgage Bankers Association, Amy has more than 20 years of experience in the mortgage industry. She can be reached at



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