The cost to originate a mortgage continues to rise, and for many lenders, simply reducing headcount isn’t a good option. There is hope though.
There are numerous way to lower costs and they lie in identifying inefficiencies, unnecessary expenses, and process improvements that streamline operations.
Let’s break down three areas where costs may be creeping in and discuss strategies to address them.
- Eliminate Avoidable Costs Like Tolerance Cures & Buybacks
Some of the most unnecessary costs in mortgage lending come in the form of tolerance cures and loan buybacks. These often stem from errors, omissions or inconsistencies in loan documentation, inaccurate fee disclosures, or other compliance issues.
How to Address This:
- System alerts – Ensure that your system is alerting you as soon as possible that a cure will be due if the loan is not re-disclosed (note: Wilqo’s platform has dedicated features for this)
- Use Data Analytics – By tracking where errors are occurring most frequently, you can pinpoint those areas in need of improvement. Mistakes happen: use them as an opportunity to proactively address future issues.
How much money would your operation save if you were able to reduce these costs?
- Shift Fee-Triggering Events to Reduce Costs from Loans Not Closed
One often overlooked cost-saving strategy is evaluating when you incur expenses during the loan process. If certain fees are paid upfront (like appraisals, fraud reports, flood certs or credit reports), but loans fall out, you’re potentially absorbing unnecessary costs.
How to Address This:
- Delay Non-Essential Costs – Assess if there are services that can be ordered later in the process, once a borrower is more committed.
- Improve Borrower Prequalification – Work with your team to identify drivers for fallout and courses of action to minimize these costs.
Are you familiar with the true cost of fallout in your process?
- Eliminate Bottlenecks & Duplication of Effort
Many lenders lose money due to inefficient workflows. Inefficiencies can lead to borrower dissatisfaction and fallout which can put a severe limiting factor on growth.
How to Address This:
- Parallel Workflow – Picture this: a loan needs to be moved forward urgently. But in most systems, only one person can access the loan file at a time. There’s work to be done, but that process or review is waiting for the file to become available. Having a platform, like Charlie, that has no record locking enables parallel workflow and reduces wait times.
- Alleviate your Bottleneck(s) – Look at where work backs up in your process. Do you have the analytics to know these details? Are there opportunities to rebalance that work onto other resources? Can you quickly scale resources to get through a backlog? Charlie’s native reporting and expertise-based and automated activities enable you to do so.
- Reduce Duplication of Effort – How much time do your team members spend reviewing and re-checking information that is already entered and validated? Look for opportunities to reduce these duplications to free up capacity. Charlie provides workspaces and workflows that put the right work in front of the right expertise, ensuring there are fewer misses and clearer transparency into the review.
How much capacity could you free up by streamlining your processes? How would your borrower experience improve?
Final Thoughts
Cutting headcount isn’t the only way to reduce loan origination costs. By focusing on eliminating avoidable expenses, optimizing the timing of fee-incurring steps, and improving workflow efficiency, lenders can bring down costs while maintaining a high level of service.
The opportunities are there, let’s work together to seize them!