The year 2020 and the beginning of 2021 witnessed refinance boom with skyrocketing production volumes. However, the boom fizzled out after 2021 Q1, resulting in a purchase-heavy market. Lenders are experiencing shrinking margins, even as the loan origination expenses continue to mount. To put it in perspective, let us check the figures shared by Mortgage Bankers Association. In Q1 2021, independent mortgage banks and chartered bank subsidiaries posted $3361 profit per loan, loan production expenses at $7964, and personnel expense at $5523 per loan. However, the volumes dried up in Q2 2021. Despite shrinking volumes, both loan production and personnel costs increased to $8668 and $5911 respectively, resulting in margin compression. The net profit per loan was just $2023.
As the margins shrink, lenders need to find a sustainable business model that improves operational efficiencies, reduces expenses, and improves profitability. The key for lenders is to boost operational efficiencies and reduce personnel costs.
Here’s how a trusted outsourced mortgage partner can help lenders:
Improving operational efficiencies
Improving operational efficiencies without capital outlay in infrastructure can be a bit challenging for the lenders. However, to lower the cost per loan, it is vital to improving operational efficiencies. One of the best and economically viable ways to improve operational efficiencies is to team up with a reputed partner that can support the lenders at every step of loan processing. From checking for missing information and documents to validating the documents, flagging frauds, and more, your outsourced partner can take care of the routine work. As a result, your in-house team will be spared from chasing the borrowers and can focus on core functions. It will help reduce the turnaround times and result in faster closing and ring down the operational cost per loan.
Reducing Personnel Costs per loan and Total loan production costs
Apart from improving operational efficiencies, lenders need to reduce operational costs. A bone of contention here is the fixed costs incurred by the lenders. If we check the figures given by the Mortgage Bankers Association, the total costs per loan and the personnel cost per loan have increased. It is because fixed costs such as salaries to employees form a large chunk of the total cost. The only way to reduce operational costs is to do away with fixed costs as much as possible. Teaming up with an outsourced partner with flexible engagement models can help you cut your total cost and improve profit per loan. The best-outsourced partners align their engagement models as per your needs, on an hourly basis, task-based or dedicated services. Thus, when the business volumes are slack, you do not pay salaries to idle personnel.
Faster processing of Clear loans
Often loan closing is delayed because of title defects, missing documents, inaccuracies in the documents, and more. Your outsourced mortgage services partner can help you at every step, whether it is preparing closing disclosures, flagging ‘still needs’ documents from the borrowers, checking for inaccuracies in the documents, calculating and reviewing loan amounts, helping with pre-underwriting tasks, and more. This not only helps in the faster processing of clear loans and reduced turnaround times, but it also helps save on resources and operational costs.
As lenders struggle with margin compression, it is high time they join hands with the right partner to improve profitability and reduce costs. GrowQ has the experience, expertise, and tools to support lenders. With GrowQ, lenders can reduce their personnel costs as well as operational costs, while achieving faster turnaround times. Whether you want to improve profitability during the slack market or want to scale up business when the market turns around, GrowQ can help!