A loan officer performs many tasks in preparing a loan. A loan officer not only helps an individual or business structure the type of loan they need, but a loan officer will analyze an applicant to decide if they are financially able to repay the loan.
In this memo, I will explain some of the job duties and responsibilities, education, technology, and current events that surround my career choice.
There are usually three types of loans 1) commercial, 2) consumer or personal, and 3) mortgage loans. Loan officers are usually specialized in only one of these. Depending on the size of the bank, a loan officer might be specialized in more than one loan category. Meaning, if you work at a small bank branch, you will be more likely to handle all three types. In a larger bank they have departments for each type of loan.
There are many steps that a loan officer must take when to approve a business or a person for a loan. First, the officer must take a salesman type role and get the customer into the bank. This step can also be completed over the telephone. The next step is to help the costumer determine the right type of loan that meets their specific needs. Today, financial institutions are finding more and more ways to better serve their customers. 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 (1:2). After the loan officer helps determine the correct type of loan, the application process begins. This first step is the gathering of information and it is the loan officer’s job to help the client complete the application and answer any questions. Once the application process is done, the officer will take all the information and compute it into a number, or “credit score”. This credit score will reflect past account histories and the current ability to repay financial obligations. Once the lender has all the necessary paper work completed, the officer will make the decision to accept or decline the loan. Loan officers also must be able to use tact and look past feeling sorry for someone and not make a sympathy loan. With each decision, the loan officer must make a very detailed analysis and place it in the loan file for future references. Following this step, the officer will contact the customer and inform them of the decisions they have made. Most importantly, the loan officer must possess communication skills to interact with customers in a language they can understand.
New banking technology has made it even easier for banks to attract new customers. Banks are able to discover new customers outside of there lending territory by offering online banking. Online banking makes it possible for customers to apply for loans online and submit their financial information directly over the internet. This reduces the amount of time a customer spends in the bank. This provides a larger potential customer base for the loan officer. Other technology includes more accurate credit scoring software. Credit scoring software is key because it enables a bank to determine the financial risk of a potential customer. These new technologies will help to expand the growing need for loan assistance.
Education is a must in order to place yourself into a loan officer position. Most banks prefer a bachelor’s degree in finance or a related field such as Business Administration. The way to advance is to further your education with a Masters degree or taking continuing education classes. There are several schools and companies that offer continuing education classes via mail and internet. You can receive a certificate of completion which can be added to your portfolio. An example of this would be the American Institute of banking which offer classes in:
Completion of such programs is a key element in advancing oneself and preparing you to further your career. Advancing beyond a loan officer might include supervising other loan officers or bank staff.
Compensation for a loan officer can be structured in different ways. Some loan officers get paid a straight salary while other banks will pay a salary plus commission. The commission comes from the number of new loans created. Some banks offer other benefits and incentives to job performance.
Median annual earnings of loan officers in 2002 were:
• Median $43,980
• Middle 50 percent $32,360 - $62,160
• Lowest 10 percent Less than $25,790
• Top 10 percent More than $88,450 (1:6).
Median annual earnings in the industries employing the largest numbers of loan officers in 2002 were:
• Activities related to credit intermediation $47,240
• Management of companies and enterprises $46,420
• Nondepository credit intermediation $44,770
• Depository credit intermediation $41,450 (1:6).
As I have described above, there are many different types of loan officers, and a wide variety of ways for compensation. 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 (1:6).
Current events in banking are causing a rapid change in daily operations for a loan officer. There are many privacy laws in place now that are new to the industry. Customer information must be kept private due to the rise of identity theft. Identity theft is when a person unlawfully obtains information on someone else and uses it to their advantage to create new credit accounts or perhaps to obtain a home mortgage. Loan officers are not allowed to give out any information to anyone other than the client. Because of the September 11, 2001 terrorist attacks, loan officers must perform an OFAC check on every new client. OFAC is a list of known or suspected terrorist or money laundering criminals provided by the Office of Foreign Affairs Commission (OFAC). Every new customer or account that a U.S. financial institution develops is subject to OFAC regulations. If a bank knows or has reason to know that a target is party to a transaction, the banks processing of the transaction would be unlawful. (3:1). These are just a few examples of how current events have affected a loan officer’s job.
After researching in detail and becoming familiar with loan officer operations, I feel confident that my personality and work skills meet the requirements needed to become a successful and knowledgeable loan officer. I feel that I meet the basic work skills by already having a combination of job titles over an eight year period. These titles include: teller, bookkeeper, data processor, proof operations, and loan clerk. I feel my “people personality”, and well groomed grammar skills are a plus for my career choice.
Bureau of Labor Statistics. U.S. Department of Labor. Occupational Outlook Handbook.
2004-05. 28 Sep. 2004 .
American Institute of Banking. Diplomas. 2004. 28 Sep. 2004
Bankers Online. OFAC & mortgage broker loans. 14 Jun. 2004. 28 Sep. 2004.