Cost Per Loan Too High? 4 Things Mortgage Lenders Should Check

October 08, 2021

After some relative respite in 2020, loan costs are rising again for mortgage lenders. Q1 of this year saw the highest Q1 per-loan costs since the inception of the MBA’s reporting on this figure in 2008. And Q2’s costs were even higher, clicking in at $8,668 per loan.

What’s more, with the refi boom slowing and competition tightening, per-loan profits are also down: from $3,361 in Q1 to $2,023 in Q2. That’s a 40 percent drop.

That’s the bad news: the cost of originating mortgages is increasing.

The good news is that, regardless of what markets do in the coming months and years, there are levers any lender can pull to manage internal costs and optimize revenue from every loan. Here are four to consider.

1: Is Your Call Center Technology Optimizing the Value of Your Leads?

Paying for leads is an inescapable part of mortgage lending. Getting those leads to the right loan officer is a crucial part of optimizing that expense.

Many off-the-shelf tech solutions for call centers can help ensure that loan officers have leads consistently, but few are equipped to handle the complex logic required to route millions of calls per day to the correct loan officer among thousands.

For a world-class call center, mortgage lenders need call center technology that…

  • Compares the ranking of a lead with the ranking of an available loan officer, based on both experience and skills.
  • Easily handles multiple campaigns, multiple lead segments, and multiple revenue streams.
  • Consistently delivers the right lead to the right loan officer.

When that happens, borrowers are more likely to get the support they need and therefore more likely to close. Loans close faster. The result: more efficient lead spend and therefore lower cost per lead.

2: How Efficient Is Your Document Management?

While the front end of mortgage lending is thoroughly digitized, the back end is not.

Many lenders, for example, still send un-editable PDF questionnaires to condo association boards as part of the underwriting process. The exchanges often involve a loan officer, an underwriter, and a condo board member who may or may not have easy access to a printer.

Scale that up, and you can see why document management is a problem for mortgage lenders. No wonder it took an average of 48 days to close a purchase loan in July of this year.

The longer a loan takes to close, of course, the more it costs. But because most origination software doesn’t offer much in the way of back-end document management, mortgage lenders using out-of-the-box solutions have few options for speeding things up.

The good news for lenders is that this is a completely solvable problem. The technology needed to digitize, unify, and streamline backend documents like disclosures, appraisals, and approval conditions exists – it’s not even that new.

All lenders need is a way to leverage that existing tech – compliantly – to make their back end as efficient as their front end.

3: Are Your Loan Officers as Productive as They Could Be?

If you’ve ever walked by a loan officer’s desk (assuming you are or were once in the same physical space as your loan officers) and heard them talking about the home team’s latest win, you probably lost your mind a little.

When loan officers are forced to make small talk, it’s often because they’re killing time while something loads or they enter data they’ve already entered at least once.

That’s a hugely inefficient use of their time – and it’s not a great customer experience. It’s terrible for your bottom line, and it can eat away at their job satisfaction.

In an ideal scenario, your technology would make use of APIs, auto-fill, and other relatively simple tools to greatly reduce the leg work your LOs are required to do – along with the likelihood that they’ll introduce errors during unnecessary duplicate data entry.

With such tech in place, LOs can work more efficiently, moving borrowers further toward commitment in a first call, improving close rates, and shortening time to close.

4: Are You Paying for the Same Leads Twice?

Sending the right leads to the right person is important – and complex.

Just as important but slightly simpler is ensuring that you’re never paying twice for the same leads.

That may sound like a no-brainer, but given that most lenders rely on several sources for leads, it doesn’t always happen. One simple way to trim cost per loan is to begin at the beginning: invest in technology that de-dupes your lead sources to make sure you never pay for – and chase – the same lead more than once.

Let Us Help You Diagnose the Source of Your High Costs

The NTERSOL team has spent decades building tech for the mortgage industry. While the four problems I highlight here are common areas where mortgage lenders can cut costs on loans, no two organizations have the exact same problems or needs.

If you suspect that your per-loan costs are higher than they should be, get in touch. We can assess your current operations and help you identify places where improvements could lead to lowered costs.

And if those improvements don’t exist off the shelf, we can build them for you.

Author: Mark Hansen
About: Mark Hansen is chief product officer at NTERSOL. For more than two decades, he’s been developing digital solutions for mortgage and real estate. In his current role, Mark combines his deep industry and technical knowledge with his communication prowess to solve clients’ thorniest problems and make sure everyone involved is on the same page throughout the process.