I was talking to an old friend yesterday who happens to be in the mortgage business. We talked and talked, mostly while shaking our heads in disbelief about how long rates have been this low.

Really.

Rates have been hovering in this goofy range for about five years, give or take. In fact, we both joked that we're getting sick and tired of saying the same old thing to our loan officer, "Don't think for a minute that rates will stay this low forever. You'd better go out and get some realtor business or you'll be dead in six weeks."

Trouble is, we've been saying that for about half a decade. Loan officers who've been in the business since late 1998 really haven't seen "the real world" of mortgage lending. What is the "real world?"

Loan Officers make money by making loans. But they can only make loans when they find people who need them. Where do they find those people? Why, in realtors' offices of course. But I would venture that more than half of all existing mortgage loan officers don't have a consistent realtor referral base. Of those, a great majority has never even set foot in a realtor's office. Instead, they're living off of the refinance wave.

Last year I was in Chicago addressing a group of mortgage professionals and I asked the crowd a simple question, "How many of you get your business from realtors?" Maybe about a third raised their hands. So what does that mean to the rest of the world?

One thing that it means is those Loan Officers who get their money from refinances are finding it harder and harder to pay the bills these days. So what do they have to do to get their business back up? They have to find more loans. And they go where the loans are. The realtor's office.

That's not necessarily news. Realtors can tell when rates begin to go back up by the number of new loan officers stopping by their office. So what's the big deal?

Loan officers who have had 80 to 90 percent of their business be refinances have certainly learned the ins and outs of mortgage loans and have seen their fair share of loan applications. But there's a real difference in purchase business vs. refinance business. Refinancing's main goal is to close the loan with the lowest rate before the rate lock expires. People who refinance have only themselves in mind. They get their approval, order their appraisal then shop their rate around to other lenders or simply sit back and wait for rates to drop still further. If the deal goes sour, only the homeowner goes home hurt, and it's usually the homeowner's fault.

In a purchase market, there are plenty more dynamics involved. The loan officer needs to be concerned on a more "global" scale. Not is just his borrower at risk; there are other considerations.

On a refinance loan, if the loan doesn't close on time, the loan officer typically asks for a lock extension and moves on. In a purchase transaction, if the deal doesn't close on time then bad stuff can happen:

• The sellers of the property can't close on their new home because they haven't sold their current one.

• The sellers are happy they didn't close on time because they have backup offers higher than the original contract.

• The buyers lost the house they were wanting.

• The loan officers' agent isn't very happy that the loan didn't close.

• The sellers agent isn't very happy that the loan didn't' close.

• The loan officer's agent won't send refer any more business.

• Don't even mention the listing agent.

• And everyone else including the attorney, the title company, the closer is, shall we say … sad.

Purchase transactions are more than just loans. They're people. A loan officer needs to be good at spinning plates during an escrow period. Just being good at knowing how to approve a loan isn't enough in the real world.

"Refinancers" are too often "order takers" and have never truly grasped the emotions involved when people buy and sell their homes. No, good loan officers take care of both legs of the transaction, hold hands, instill confidence and squash problems as they arise. But that takes real world practice. Make sure your loan officer has some real world experience.