The educational arm of a national association of lenders hopes to relieve some of the paralysis that hits the lending industry during periods of heavy demand by offering the "often ignored" loan processor and loan officer the opportunity to earn professional accreditation.

This month and next, the National Mortgage Institute in Fairfield, Conn., an affiliate of the Washington-based National Council of Savings Institutions, will confer the first of its Certified Loan Processor (CLP) and Certified Residential Mortgage Officer (MLO) designations upon applicants who meet the program's requirements. A total of 60 candidates have completed the course work and passed preliminary examinations but still face a final exam.

The designations will give mortgage department officials a gauge for measuring a job applicant's qualifications for these two crucial entry level positions, according to the institute's director, Marshall W. Dennis. Too often, he explained, job seekers have "buffaloed" lenders as to their competency and training. The lessons learned during the course work should also improve the efficiency of these employes and reduce the number of mistakes made, he said.

The institute said it plans to design one or two new certification designations each year, working its way up the organizational hierarchy. Next year, it intends to certify loan underwriters. The following year it will focus on secondary mortgage market specialists. Even further down the road, Dennis said he would like to offer two broad designations, one based on proficiency in all aspects of residential lending and the other for income property lending.

The institute decided to start with the lowest rungs on the lending ladder because loan processors and loan officers are frequently ignored by management, yet they often serve as the only representatives of the lender with which the public comes in contact, Dennis said. A loan officer solicits business through real estate agents and takes borrowers' applications, while a loan processor subsequently assembles the paper work that will serve as the basis for whether a loan is approved.

During periods of increased loan demand, these workers become the "most important people" in the lending chain, Dennis said. "Lenders will steal people from each other and pay exorbitant salaries during a crunch."

Dennis predicted that employers will embrace the certification program as a way of building employe loyalty during good times and bad. "They want to find a way to keep their people happy and allow them to grow," he explained.

The loan processor, the lowest worker on the lending totem pole, is eligible to begin work on the certification process after one year on the job. The course work emphasizes that these days "much more" is demanded of the position beyond the clerical work involved in collecting the verifications of a borrower's employment, assets and credit, Dennis said.

A CLP must demonstrate a working knowledge of federal lending laws, including the Equal Credit Opportunity Act, Truth in Lending Act and the Real Estate Settlement Procedures Act. A successful candidate must also understand the requirements for loans that will be sold in the secondary market. When a loan goes into default, the secondary mortgage purchaser will force the lender to buy back the mortgage if it discovers that the loan was not processed properly, Dennis said.

Loan officers with three to four years of experience are eligible to pursue an MLO certification, although candidates with only two years on the job occasionally may be accepted into the program. Passing the MLO test requires mastery of the loan origination process, escrow funding, foreclosure proceedings, loan servicing methods and interpretation of appraisals. It also calls for knowledge of mortgage-backed securities, mortgage wholesale operations, brokered transactions and the packaging of securities.

Over the next couple of years, Dennis said he expects the supply of accredited processors and officers to expand rapidly enough that sophisticated borrowers could shop for lenders based on whether they employ credentialed workers.

Other housing lending groups seem less than excited about the new credential effort, however. The U.S. League of Savings Institutions said it doubts there will be that much demand for the certification among those who control a company's purse strings. "Office managers won't encourage people to pursue {the designations} because {those attaining the certifications} would just become more valuable on the marketplace," predicted Dall Bennewitz, a league vice president. In good markets, he explained, the annual turnover rate at the lower levels is already 70 to 80 percent.

Furthermore, Bennewitz said he is unconvinced that the certification process will actually help break up processing logjams. "You're only going to be able to do 'X' number of loans a day," he said. Consequently, Bennewitz said he doesn't see the U.S. League "rushing into certification."

The Mortgage Bankers Association of America already offers more than 100 seminars and workshops in different areas, but they don't lead to accreditation, according to Executive Vice President Warren Lasko. MBA does, however, award a Certified Mortgage Broker designation to senior officials.

"It's intended to be the highest professional designation that somebody in the business of mortgage banking can get," Lasko said. "To get it is an elaborate process involving all kinds of education over several years and culminating in oral exams that are similar to PhD finals."

Although the question of accreditation for lower echelon employes has been raised over the years, so far the prevailing sentiment is to "reserve the CMB as the standard and not dilute it with a number of designations," he said. Since the program began in 1973, only 285 mortgage bankers have earned CMB status.