Industry experts believe that a drop in interest rates may likely boost mortgage demand. However, lenders are still worried about their shrinking margins. According to the Mortgage Bankers Performance report, 24% of the loan applications were lost due to fallouts in the First Quarter of 2021. The report also states that the loan production expenses comprising employee emoluments, commissions, rent, equipment, and other expenses increased from $7938/loan in the last quarter of 2020 to $7964/loan in the first quarter of 2021.
Thus, 2 things are brought to light in the report:
- Increase in fallout rates
- Increase in cost of loan production expenses
Unfortunately, both factors contribute to shrinking lenders’ margins. So, even if the volume firms up due to lower interest rates, the overall picture remains bleak for the lenders.
Unless lenders strategically work towards lowering the loan fallout rates, they will be burdened with high costs per loan. It also diminishes the lender’s competitiveness in the market.
Blame it on the interest rates and the borrowers
When borrowers fallout before closing the loan, lenders blame it on interest rate changes and the borrower’s inability to sell the property. While these 2 are contributing factors, they are not solely responsible for the borrower’s fallout.
Lenders spend money and resources to get warm leads. So, every warm lead lost in transit not only results in lost business but also a loss for the lender. Instead of trying to find new leads and marketing to them, try to figure out at what stage you are losing the borrowers.
Customer experience matters the most
According to customer research reports, customer experience can improve mortgage origination. Most customers opine that customer experience is rated at par with the best rates. So, lenders need to find out if they are losing customers due to a lack of customer services. This could be a big opportunity for lenders to plug the loan fallouts, without sacrificing their margins. Your inability to offer a delightful customer experience to your borrowers can be resolved by:
- Training your employees for a better customer experience
- Outsource your loan origination process to a reliable mortgage service provider
The outsourcing option proves to be economical as they have the experience, expertise, and bandwidth to help lenders with the loan origination process. With services such as verifying loan documents, preparing disclosure packages, loan estimate calculations, sorting functions, and more, your turnaround time is drastically reduced, offering a hassle-free experience to the borrowers.
Getting things right the first time
One of the most irritating experiences for borrowers is multiple iterations from the lenders. Borrowers find eleventh-hour surprises frustrating and when they are faced with multiple document requests, unnecessary information requests, it nudges them to move to other lenders.
To resolve this, it is imperative for lenders to:
- Simplify the loan application and documentation process
- Thorough checking of the documents so that missing documents can be called just once, avoiding multiple iterations
- Serve borrowers with speed and transparency
Controlling fallout rates can dramatically improve your margins and reduce cost per loan. The mortgage arena would be facing fierce competition in the days ahead.
The GrowQ Advantage
An experienced outsourced mortgage support partner can help you at every stage of the loan life cycle for improved customer experience, efficiency, and cost-effectiveness. With our services such as loan origination support, pre-underwriting, mortgage support, closing support, and more, lenders can improve customer retention rates, reduce their cost per loan and prevent margin compression, despite volatility in the market.
To know more about our services and how we can help, call us today!