It is a known fact that mortgage is a competitive field like any other business. The fixed cost overheads, the interest rates and many other factors influence the competitive edge..In last 5 years the cost of originating a loan has gone up from $3666 to above $9000. It is difficult to sustain business in these challenging environments. In these tough scenarios, it gets very difficult for retail lenders to manage the overheads involved with loan processing.
However, retail lenders can bring down this processing cost by adopting certain unconventional changes or by combining the benefits of technology and selective outsourcing of processes.
As retail lenders prepare to do loan boarding and prepare the file for a pre-underwriting QC, there is a host of processing work that they need to complete, including documentation, appraisal, title & tax valuation etc. Hiring full time processing resources is expensive and besides it is not scalable to meet the varied demands.
What if you were able to save over 45% costs in loan processing and reduce the time taken by over 30%? Here are some ways, you can do that.
- Enabling a Mobile app for the borrower
A lot of time and money is wasted in back and forth communication with the borrower related to documents that are needed for processing. With a mobile app, this can be simplified, and the borrower can just upload his documents by scanning them using the mobile and upload them directly to the portal. This not only saves time involved in back and forth document collection, but also money wasted in shipping.
- Building scale in the processing team
A loan processing team-member can at best on-board 20-25 loans a month, so in case the volumes are high, you end up needing so many members in your loan processing team. Adding a large team can work counter-productive, when volumes go down and all of this means additional fixed costs and reduced margins. It makes sense to create a virtual processing team,that can be ramped up or down based on the demand. Also, you pay variable pricing, which means that you pay based on what you use and not fixed fees. This can help you build scale in your processing team and help you respond faster, when volumes go up.
- Using a pay as you go model for technology
Technology can certainly help automate several of your tasks for you, but most lenders end up spending a lot of time evaluating and trying to identify the technology that will work for them. It gets difficult as there are upfront capital costs involved in acquisition of the technology and the ROI is not certain on day one, so there is a risk involved. There are high costs involved in developing in house technology or working with an outsourced technology vendor who do not understand the nuances of mortgage industry. Consider deploying technologies using a pay-as-you-go model from someone within the industry. This ensures that that there is no upfront cost involved in acquiring the technology and yet, you can start using the technology and drive business benefits from day one. Also, since the technology is already in use, it already factors in the relevant domain knowledge and you benefit significantly as there is no development time involved.
- Invest in Accuracy and first time right
Accuracy in technology can save you time as well as a lot of costs associated with compliance risks. It makes sense to invest in OCR enabled document auto-indexing, which ensures over 99.5% accuracy.
- Get a Loan Officer Assistant
Loan officers are expensive resources and you would need them to use most of their time in closing loans rather than being engaged in supplementary follow ups like connecting with borrower, coordinating for documents etc. A virtual assistant who can do all ancillary work and enhance the sales conversions can help significantly reduce costs and increase the revenues.
Visionet offers a host of technology and services to assist retail lenders in processing their loans faster, and at significantly lesser cost. Right from loan set-up to processing and vendor ordering, Visionet manages it all to improve the efficiency for the retail lender.
Alok Bansal is Managing Director of Visionet Systems Inc. and has 21 years of experience in managing strategy and global BPO operations. He excels in optimizing and leading the growth of financial services companies who are looking to take their mortgage operations to the next level.