As with any industry with few requirements for entry, being a mortgage loan officer often times simply means just showing up for work. Okay, there's usually a state-issued license required and probably a fingerprint taken but really there's not a lot to it.

Over the past 5+ years, the mortgage industry had been in an unprecedented and not likely to occur again gold rush. Rates began to fall in 2001 and had been on a steady decline since our "correction" which began earlier this year.

Of course the papers read that rates are now at 4 year highs but really, so what? Rates are still under 7.00 percent and consumer advocates would scream bloody murder if rates shot up into the 8.00 percent range where they hovered in the mid-90s.

Mortgage loan officers enjoyed a double-dip. Home sales were brisk, new home construction was white hot as home ownership levels hit record numbers. That means people needed mortgages, folks.

At the very same time, rates were dropping … gradually. For a long time. A loan officer typically had to open his window for a couple of minutes to let new loan applications fly in. Then close the window when he got too busy.

The result was an influx of new, wet-behind-the-ears Loan Officers. Still no problem there, everybody starts somewhere right? The problem is that Loan Officers who have only been in the business for a couple of years may have never truly learned how loans are approved, declined or saved from certain disaster.

Automated Underwriting Systems have replaced "loan-savvy." Instead of a loan applicant providing a loan application to a Loan Officer to help determine the type and size of loan she can qualify for, the Loan Officer instead inputs the information into the AUS, waits a few seconds, then "Ding!," Loan Approval.

Often without the Loan Officer knowing why. Or "why not" in the case of not receiving a loan approval.

I bring this up because I was listening to a conversation at a Mortgage Bankers luncheon a couple of weeks ago. I was in a circle of Loan Officers and they were all talking about how "they" were getting loan approvals for borrowers with abnormally high debt ratios.

The conversation went something like this;

"Yeah, well I got my client approved with a 54 debt ratio."

"Oh yeah, that's nothing, I got my client approved at 60. Full doc!"

And so on. In fact, these Loan Officers didn't have anything to do with the approval other than data input. So I asked them a question,

"How did you get that guy approved with a 60 ratio?" Answer?

"I don't know, I just sent his information in and I got an approval."

Which led to another Loan Officer saying, "I think there's something wrong with that system, I submitted a loan and my clients debt ratios were in the 50s and I couldn't get an approval. And these people had great credit."

I then began suggesting various scenarios such as increasing liquid assets, finding some additional down payment, hybrid loans, buying down the rate and so on. Not one of the loan officers had considered these other factors when one of their loans weren't approved.

AUS applications are designed to streamline the approval process, not replace brains. Now those same loan officers are going to have to compete not just in being able to take a loan application but to figure out how to get tough deals through closing. And they can't do that because they really didn't have to.

All they had to do was open the window.